High Deductible Health Plans

You must have coverage under an HSA-qualified “high deductible health plan” (HDHP) to open an HSA. Generally, this is health insurance that does not cover first dollar medical expenses. Federal law

requires that the health insurance deductible be at  least: $1,100* - Self-only coverage

$2,200*- Family coverage In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed: $5,500* - Self-only coverage $11,000* - Family coverage

In general, the duductible must apply to all medical expenses (including prescriptions) covered by the plan. However, plans can pay for “preventive care” services on a first-dollar basis (with or without a co-pay). This can include routine pre-natal and well-child care, child and adult immunizations, annual physicals, mammograms, pap smears, etc.

*2007 amounts; adjusted annually for inflation

HSA Contributions

You can make a contribution to your HSA each year that you are eligible. You can contribute up to the amount of your HDHP deductible, but no more than:

$2,850* - Self-only coverage

$5,650* - Family coverage

The following table illustrates how this works:

Individuals age 55 and older can also make additional “catch-up” contributions. The maximum annual catch-up contribution is as follows:

2007 - $800

2008 - $900

2009 and after - $1,000

Using Your HSA

You can use the money in the account to pay for any “qualified medical expense” permitted under federal tax law. This includes most medical care and services, dental and vision care, and over-thecounter

drugs such as aspirin.

You can generally not use the money to pay for medical insurance premiums, except under specific circumstances, including:

• Any health plan coverage while receiving federal or state unemployment benefits.

• COBRA continuation coverage after leaving employment with a company that offers health insurance coverage.

• Qualified long-term care insurance.

• Medicare premiums and out-of-pocket expenses, including deductibles, co-pays and co-insurance for:

† Part A (hospital and inpatient services)

† Part B (physician and outpatient services)

† Part C (Medicare HMO and PPO plans)

† Part D (prescription drugs)

In addition to medical expenses of yourself, you can use your HSA to pay for medical expenses of your spouse or your dependent children, even if they are not covered by your HDHP. 

Any amounts used for purposes other than “qualified medical expenses” are taxable as income and subject to an additional 10% tax penalty. If you turn 65, become disabled, and/or enroll in Medicare, the 10% tax penalty no longer applies.