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Medicare Compliance & Reimbursement

HEALTH PLANS:

New HSA Guidance Allows For Design Flexibility

Published on Thu Jun 10, 2004

Government's enthusiasm for HSAs is good news for health plans.

The Bush administration is doing everything it can to get more health plans and employers on the consumer-driven health care bandwagon.

The Treasury Department issued guidance May 11 clarifying the ways in which health savings accounts may be used by workers who also have access to other employer-based health accounts, such as flexible spending accounts and health reimbursement accounts.

Last year's Medicare Modernization Act created HSAs, but it included language preventing an employee from contributing to an HSA account at the same time that he or she is covered by a general-purpose FSA or HRA. In the new guidance, Treasury says that certain types of more limited FSA and HRA plans may be used in tandem with HSAs.

Specifically, employees can now contribute to an HSAat the same time as they are covered by:

  • a limited-purpose FSA or HRAthat covers a defined set of purchases such as vision, dental or preventive care;
  • a so-called post-deductible FSA or HRA, which only reimburses for spending that occurs after the employees'minimum annual deductible has been met;
  • a retirement HRA that only reimburses expenses after the worker has retired; or
  • a "suspended" HRA, for which an employee has elected to forgo health reimbursements for the period during which HSA contributions are being made.

    That's good news for HSAproponents, says Greg Scandlen, director of the Galen Institute's Centerfor ConsumerDriven Health Care. "It provides a real benefit design flexibility" for employers and health plans, he says.

    The guidance is just the latest sign that HSAs are a big priority for the Bush administration, Jerry Ripperger of Principal Financial Group pointed out at the America's Health Insurance Plans law conference May 12. He noted that multiple government agencies have already passed multiple HSAguidances in a matter of months, as opposed to other initiatives where nothing seems to happen for years.

    "The IRS is moving with lightning speed on these issues," Scandlen says.

    The government is slated to release yet another guidance this month, and Scandlen says the Internal Revenue Service may institute a transition period allowing states two years to alter their mandated benefit programs. Currently, some states mandate health plans to cover certain benefits without requiring consumers to pay deductibles, but these regs are at odds with HSAs' requirements that enrollees pay their high deductibles before accessing any benefits.

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