Does an On-Site Employee Health Center disqualify employees from HSA eligibility?

[Guest ETX]

I have a client with an on-site health center that provides emergency care and treatment of minor illnesses and injuries. Can this client offer an HSA to its employees?

[Gary Lesser]

I think they can establish an HSA, so long as the benefit isn't provided to employees under an insurance-type arrangement.

[GBurns]

How do the health center and health center employees get paid? Is a claim submitted to an insurance company, claims administrator or anyone else for payment for the services or treatment given to the employee?

[GBurns]

This should have some bearing:

http://www.aishealth.com/GNOW/091205.html#gnowone

A Google search should also bring up articles that also have this negative opinion on wellness and other programs. Some would opine that your proposed program offers "first dollar" coverage and wellness type coverages, which would be affected by this comparability rule.

[Jacmo]

An on-site clinic that provides more than nominal medical benefits (e.g., a flu shot or aspirin) and preventive care would likely be considered other medical coverage that disqualifies an individual from HSA eligibility.

-----Informal, nonbinding remarks of Elizabeth Purcell, IRS, Office of Chief Counsel, Mar. 25th, 2005 ECFC annual conference

[leevena]

Jacmo, could you please be a little more specific with your answer, I could not find the reference you made. It seems to me that the key is the insurance function, not the provision of healthcare. The HSA regulations all refer to the use of the insurance, not the receipt of health care. If the on-site medical provider provides health care services, and the expenses are not submitted to the insurance plan, why wouldn't the employee qualify for HSA? Wouldn't the on-site medical provider be considered in the same light as any other provider?

[J Simmons]

From a public policy perspective, the Purcell comments as reported by Jacmo make sense. The reason for the high deductible requirement is to re-engage people as consumers, balancing the cost of health care against the perceived benefits of it in the process of deciding upon it. If the EE is provided cost-free basic health care on-site at the ER's expense, the desired consumerism is lost. The care may be chosen by the EE with no financial consequence.

[leevena]

From a public policy perspective, the Purcell comments as reported by Jacmo make sense. The reason for the high deductible requirement is to re-engage people as consumers, balancing the cost of health care against the perceived benefits of it in the process of deciding upon it. If the EE is provided cost-free basic health care on-site at the ER's expense, the desired consumerism is lost. The care may be chosen by the EE with no financial consequence.

I don't disagree with your observation about consumerism, but as I see the law, if the on-site care, or any provider care is not submitted to the insurance company, it would not disqualify someone from taking a HSA. PS, by insurance, I am including a self-funded plan also.

[J Simmons]

leevena, is there a substantive distinction for the taxable HSA contributions between an arrangement whereby the ER promises to and does pay for medical care services provided to EEs by third-parties and an arrangement whereby the ER pays health care providers as employees to provide identical medical care services to the ER's other EEs?

Do you hinge your distinction on the use of the word coverage in 223©(1)(A)(ii)(II)?

Whether paying health care providers as third-parties or as employees, it seems to me the ER is paying to have medical services provided to its EEs and that would undermine the purpose for the high-deductible and no other coverage requirements for deductible HSA contributions.

[Guest mjb]

Why are informal ad hoc statements by IRS officials treated as having substantial authority as an interpretation of the IRC. No IRS official has any authority to speak on behalf of the IRS when addressing an audience (The 1998 IRS Reform act prohibits IRS employees from making up their own interpretations of how the IRC applies)

If an IRS official wants to create such a rule then the proper procedure is to publish a proposed regulation under the Administrative Procedures Act so that the public may comment. There are good reasons why on site medical and health facilities that treat employee illness should be allowed w/out affecting HSA eligibility e.g., state law may mandate such care for dangerious occupations or it may be required under a CB contract. Consumerism is not a valid reason to deny eligibility for HSA because the employee is eligible for treatment by the employer for employment incurred illnesses or injuries which need quick and diagnosis and medical care.

[leevena]

Hi John. I had some time to think this through and believe I have an answer. Your last posting took me some time to understand.

First, the original posting asked if an employer with an on-site medical provider could offer an HSA. The answer to that is yes, they can. Just because the employer offers on-site medical provider does not make them ineligible to offer an HSA. The requirements around the first dollar coverage is on the employee, not the employer.

Secondly, I agree with MJB, but could not explain it as clear as he/she did. This is how I understood the regs, and since I could not find anything official from the govt regarding the use of on-site providers, I would be open to any help you can provide.

Thanks. Lee

[J Simmons]

Hey, leevena,

When a question pops up, in practice in advising an ER or otherwise, for which the statutes, regs, or administrative pronouncements (like Rev Ruls or DoL Advisory Opinions) provide no guidance, I typically look to the informal statements of IRS or DoL officials for some direction. If and when the agency might promulgate a rule resolving the question, these officials are often involved in the policy discussions that lead to and actually writing the rule. I wouldn't call them 'substantial authority' but I would suggest that these informal statements are informative of what some that will perhaps be at the policy making table are thinking.

I think that Jacmo's posting added to the information that is posted in this thread, even if it goes beyond the OP.

What's a 'health plan' for purposes of HSA contribution tax deductibility? IRC sec 223 doesn't define the term. Would an on-site medical facility that provides occupational medicine or the most rudimentary first-aid only be problematic? I doubt it. Would an on-site medical clinic for EEs established to provide cholesterol and diabetes diagnosis and treatment to reduce the ERs costs under its traditional indemnity/reimbursement health, as are becoming popular, be problematic? Depends on the definition of 'health plan'--as yet undefined. In that regard, I find Ms Purcell's comments give some direction.

[Jacmo]

Point taken, Mr. Moderator (mjb). More than likely, a specific determination will be needed with regard to any program offered. To make a specific determination, see IRS Notice 2004-23, IRS Notice 2004-50, and 2004-33.

If these notices don't address your situation, use your best judgement. Informal, non-binding remarks might be helpful.

[Jacmo]

To be a little more helpful-- In IRS Notice 2004-23, under the heading "Preventive Care Safe Harbor", a short list of acceptable preventive care services is given, then this final paragraph:

"However, preventive care does not generally include any service or benefit intended to treat an existing illness, injury, or condition".