HSAs - assignment to physician

[Guest TinaThornton]

Some of my physician group clients are asking if they can request patients to sign an assignment of HSA funds. I know HSAs are covered by the prohibited transactions rules, but I have been unable to find any guidance on whether such an assignment would be a prohibited transaction. The physicians want to increase their chances of getting paid for services which fall below the patient's deductible. They understand that there is no guarantee that the patient will have sufficient funds in their HSA to cover the expenses. Any ideas? Thanks.

[Guest JKG]

Rather than being a prohibited transaction (Sec. 223(e)(2) applying 408(e)(2)), the bigger issue may be that the account is considered distributed to the extent of the assignment (Sec. 223(e)(2) applying 408(e)(4)). Although, in form, the transaction really isn't a loan, I think that the IRS might, in substance, consider the doctor's performance of service in return for an assignment of the HSA to be a temporary loan to the participant.