High Deductible Health Plan (HDHP) & Health Savings Account (HSA) FAQs
1. What is a HDHP & HSA? How is it different than other medical plans?
A High Deductible Health Plan (HDHP) is a health plan product that combines a Health Savings Account (HSA) with traditional medical coverage. It provides insurance coverage and a tax-advantaged way to help save for future medical expenses. The HDHP & HSA gives you greater flexibility and discretion over how you use your health care dollars. HDHPs have higher annual deductibles and out-of-pocket maximum limits than other PPO plans. With a HDHP, the annual deductible must be met before plan benefits are paid for services other than in-network preventive care services, which are covered 100%. HDHPs also protect you against catastrophic out-of-pocket expenses for covered services. Once your annual out-of-pocket expenses for covered services from in-network providers, including deductibles, copayments and coinsurance, reaches the pre-determined out-of-pocket limit, the plan pays 100% of the allowable amount for the remainder of the calendar year. The ability to fund an HSA account is another way how this plan is different from other PPO plans offered.
A Health Savings Account allows individuals to pay for current health expenses and save for future qualified medical expenses on a pre-tax basis. Funds deposited into an HSA are not taxed, the balance in the HSA grows tax free, and that amount is available on a tax free basis to pay medical costs. While most employees will qualify for an HSA, the IRS does have certain eligibility requirements to be able to take advantage of the triple tax savings an HSA account provides.
2. Is a HDHP right for me?
HDHPs are not right for everyone and there are many factors to consider before enrolling in this plan type. While many people may initially be skeptical of HDHPs, they can be a reasonable choice for many and can be particularly valuable if you know how to use them effectively. For individuals covered by a HDHP, an HSA offers a number of benefits. Money that may otherwise be lost to high premiums could be invested in a tax-free, interest-bearing HSA and withdrawn tax-free for qualified medical expenses, resulting in a triple-tax savings. For those with higher medical expenses who are also financial planners, a HDHP combined with an HSA still may provide overall cost savings as compared to a traditional plan with higher premiums and out of pocket maximums. A HDHP can also be a good option for a healthy young employee with few anticipated medical needs.
3. How does an HDHP with an HSA work?
- You enroll in an HDHP
- You have the option to make pre-tax payroll contributions into your HSA, up to a maximum amount determined by IRS rules. Your HSA contributions earn tax-free interest.
- When you need preventive care, your plan will cover 100% of the costs, subject to any limits outlined in the plan's brochure
- When you need non-preventive health care, you pay the full cost of that care with funds from your HSA or out of pocket, up to your plan's high deductible
- If you reach the out of pocket maximum, your HDHP will provide needed care with no charge to you
Other Key Features:
- Distributions from your HSA are tax-free for qualified medical expenses for you, your spouse and your dependents, even if they are not covered by an HDHP.
- You may withdraw money from your HSA for items other than qualified medical expenses, but it will be subject to income tax and, if you are under 65 years old, an additional 20% penalty tax on the amount withdrawn.
- You may allow the contributions in your HSA to grow over time, like a savings account.
- The HSA is portable – you may take the HSA with you if you leave the County or switch to another plan.
4. What advantages are there from a HDHP?
- Premiums are typically lower than PPO plans.
- If you are a low utilizer of your medical & prescription benefit you may able to save money.
- You can combine your HDHP with a Health Savings Account that HSA a triple tax benefit. The triple tax benefit for the HSA is 1. Pre-tax payroll deductions, no tax on any interest accrued, and tax-free withdrawals for any qualified medical expenses. You may also withdraw your funds at the normal tax rate for non-qualified medical expenses when you are 65 or older without a penalty.
5. Are there any risks with a HDHP?
While you will never pay more than your out-of-pocket maximum, HDHPs have higher annual deductibles and out-of-pocket maximum limits than traditional health plan options. With a HDHP, you pay for all of your health expenses except preventative care until you meet your annual deductible. Once your annual deductible is met the plan will begin cost sharing until you meet the annual out-of -pocket maximum. Once you meet the out-of-pocket maximum the plan will pay 100% for the plan year.
One key difference to note from a traditional PPO health plan is that you are required to meet your medical annual deductible before prescription drugs are covered under a coinsurance cost sharing. You are likely to pay more for your prescription drugs with a HDHP than a traditional PPO health plan.
6. Is my pharmacy and prescription drug benefit the same as the other County plans?
No, your pharmacy benefit is not the same as the other County plans. Please click here to see the pharmacy benefit for the HDHP.
7. How much will I pay for prescription medications?
Under this plan you are responsible for the full cost of your medications until you reach your annual deductible, there are no co-pays.
8. Are there any resources to help me manage my prescription costs?
Under a HDHP you are responsible for the full cost of your prescription drugs until you reach your annual deductible. To help manage the costs of your prescriptions, there are resources like GoodRX that will help you find a pharmacy near you with the lowest cost for your prescription.
9. How does the annual deductible and out-of-pocket maximum (OOPM) work for the HDHP?
The HDHP Plan has an aggregate deductible and embedded out-of-pocket maximum. Click here for an illustration of the difference.
For Employee only coverage this means you will have to pay for medical and pharmacy expenses up to the individual deductible amount until the plan co-insurance, or cost sharing, benefits begin. You will pay no more than the plans individual out-of-pocket maximum.
For employees with dependents, your family will have to pay for medical and pharmacy expenses up to the family deductible amount anytime anyone utilizes services. You can meet the family deductible because of medical care to one person or from expenses incurred by the entire family. Once the family deductible is met, the co-insurance or cost sharing benefits of the plan begin until the out-of-pocket maximum limits are met. Once an individual meets the individual OOPM, the plan will pay 100% of all covered expenses for that person, even if the family OOPM has not been met. Once the family OOPM is reached the plan must pay 100% of all covered expenses for everyone — regardless of whether each family member has reached the individual maximum.
10. What network of providers can I utilize? Do I have access to out of network providers?
Those enrolled in the HDHP will have access to Anthems Blue Cross PPO Prudent Buyer PPO network. This comprehensive nationwide network will give you access to both in-network and out-of-network providers. To reduce out-of-pocket costs it is always encouraged to access in-network providers.
11. If I enroll in the HDHP, will I automatically be enrolled in the HSA?
No, if you elect the HDHP plan, you will have the option to contribute a specified amount to your HSA from your paycheck. While it is strongly recommended that you contribute to your HSA, it is not required and you will not be automatically enrolled in the HSA. The IRS has specific requirements about who is eligible to contribute to an HSA.
12. How do I know if I am eligible for an HSA?
You are eligible for an HSA if you are:
- Enrolled in an HDHP and not covered by another health plan (including a spouse’s health plan, but not including specific injury insurance and accident, disability, dental care, vision care, or long-term care coverage)
- Not enrolled in Medicare
- Not covered by your own or your spouse’s flexible spending account (FSA), and are not claimed as a dependent on someone else’s tax return
13. What are the annual HSA contribution limits?
The Internal Revenue Service (IRS) establishes contribution limits for Health Savings Account's linked to a High Deductible Health Plan (HDHP). The 2019 contribution limit for an individual is $3,500 and the family limit is $7,000. For individuals who will be 55 or over by December 31st, 2019, there is an increased "catch-up contribution" limit of $4,500 for an individual and $8,000 for a family.
14. How is my HSA account funded?
Your HSA will be funded through pre-tax payroll deductions you make, up to the annual limit.
15. Can I contribute to my HSA outside of payroll deductions?
Contributing to an HSA outside of payroll does not defeat the purpose – non-payroll HSA contributions are still tax deductible. In other words, the same tax benefits apply (outside of FICA), it’s just that they won’t be 100% realized until you complete your tax return.
- If you do contribute to an HSA on your own, it may be wise to adjust your withholding tax allowances with your employer downward, so that less taxes are withheld over the course of the year and you don’t end up with an inflated refund.
16. Do the funds in an HSA account rollover?
Yes, unlike an FSA, any unused balance will rollover to the next plan year, it is not use-it-or-lose-it. If you have a relatively low-expense year you can roll over the funds and use them in a year where you may have more medical expenses.
17. How do I access my HSA funds and when can I utilize them?
You will have access to utilize your funds as they accrue from your payroll deductions through a debit card. Debit cards will be mailed to your address listed in BenXcel with instructions for how to register the card on the BCC My SmartCare Portal and how to download the Mobile App along with general information about the program. You will be able to access the available funds at the point of service utilizing your debit card.
18. What happens to the funds in my HSA if I separate or retire from the County?
In addition to your HSA funds rolling over year after year, you are also able to to take those funds with you and access them after you separate from County employment.
19. What expenses qualify for an HSA?
Like an FSA account, HSA qualified expenses are determined by the IRS. To view a full list of qualified expenses, please click here.
20. Does the qualified expense have to occur in the same year the contribution was made?
No, because the funds roll over from year to year, the medical expense does not have to occur in the same year the contribution was made.
21. Are healthcare premiums a qualified expense? From other employers and/or Medicare
Generally, you cannot treat insurance premiums as qualified medical expenses unless the premiums are for:
a. Long-term care insurance, subject to IRS mandated limits based on age and adjusted annually (see IRS Publication 502: Long-Term Care).
b. Healthcare continuation coverage (such as coverage under COBRA – see IRS Publication 502: COBRA Premium Assistance.
c. Healthcare coverage while receiving unemployment compensation under federal or state law.
d. Medicare and other healthcare coverage if you are 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).
For (b) and (c) above, your HSA can be used for your spouse or a dependent meeting the requirement for that type of coverage. For (d) above, if you, the account beneficiary, are not 65 years of age or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) generally are not considered a qualified medical expenses.
22. Can I utilize the HSA for my dependents expenses? Even if they are not on my medical plan?
You can use an HSA to pay for qualified medical expenses for yourself, a spouse, and your dependents, even if they are not enrolled on your County medical insurance plan and covered by other insurance.
23. Can I cash out my HSA?
You may withdraw money from your HSA for items other than qualified medical expenses, but it will be subject to income tax and, if you are under 65 years old, an additional 20% penalty tax on the amount withdrawn.
24. I have no funds in my HSA account and I'm now responsible for my annual deductible and out-of-pocket maximum, is there any assistance for me?
For medical expenses you can ask your provider or the hospital for a payment plan where you pay a percentage of the bill each month until the balance is paid off if you have not accrued enough in your HSA to cover the expense.