Health Savings Accounts and Rev. Rul 2004-38

[jstorch]

Does anyone else think the Service totally ignored the last part of Code Section 223©(1)(A), reading "and which provides coverage for any benefit which is covered under the high deductible health plan", in the revenue ruling concerning prescription drug coverage with HSAs?

I could buy the description of the legislative history, but the plain language of the statute would allow prescription drugs to be reimbursed in a non High Deductible Health Plan as long as the eligible individual's HDHP didn't cover prescription drugs.

Am I missing something?

If not, any suggestions for responding to the revenue ruling? (At least we've got transitional relief until Jan 2006.)

[Don Levit]

I have a similar interpretation of the legislation. In fact, I view the legisalation as actually allowing 2 separate plans, with identical coverage. Let us assume that there are 2 group plans. Plan 1 is not coordinated with any other benefits (a COB provision is not included). Plan 2 is your typical group plan with a COB provision. Assume that plan 1 has $25,000 of benefits. Plan 2 would have the qualifying $2,000 per family deductible. However, because it pays second, the pricing for the deductible would start at $27,000, instead of $2,000.

In order to qualify for a single HSA, plan 1 must have a $2,000 family deductible.

Don Levit