Regulations concerning deductibles in HDHP with HSA

[Mary C]

My company will be implementing a high deductible health plan at annual enrollment 7/1. We will have two carriers nationwide because of network access in various parts of the county. We will have a $1,500 single deductible/$3,000 2 party or family deductible. After the deductible is met, there is a 80%/20% coinsurance until the OOP maximum is met.

Recently one of the carriers came to us and said because of regulations governing HDHP in order to allow an HSA with the plan, the deductible must work differently than what we thought. According to the carrier, if you have a family of 3 and one person has $1,600 in claims, benefit co-insurance will not begin for that individual because the family deductible of $3,000 has not been met.

Can anyone confirm this or provide the legal site for this?

thanks in advance for any help you can provide.

[Larry M]

Mary,

I believe your carrier is "almost" right. It is my understanding your plan's deductible could be modified as follows:

single employee: $1,500

family deductible $3,000 in aggregate, but no more than 2,050 for any individual.

Not quite what you have, but better than what the carrier is requesting.

Note, Leevena, in the other forum, believes you can have the family deductible as 3,000 with no more than 1500 per individual.

I can not find such a cite.

[jmor99]

You might want to check the following: www.hsainsider.com then see the publication "HSA Road Rules" page 13, item #4 under "Health Savings Account Road Rules for Health Insurers":

"4. Imbedded (per person) deductibles for family plans are not allowed unless they meet the minimum deductible for families of $2100 (2006).........."

Not a legal source, but it makes sense.

Edit by JMOR99: here's a legal source: www.treasury.gov/offices/public-affairs/hsa-basics see slide 18, second bullet:

"if the embedded individual deductible is less than the minimum deductible amount for family coverage, then the insurance is not a qualifying HDHP." The minimum deductible for family coverage is $2100 for 2006. See Gary Lesser's chart "HSA Limits" at this site.

[namealreadyinuse]

This was our understanding as well, but we never knew why. These are great answers to the original post!

[Gary Lesser]

Example 1. In 2006, a plan which otherwise qualifies as an HDHP provides family coverage with a $2,100 deductible for each family member. The plan pays 100 percent of covered benefits for each family member after that family member satisfies the $2,100 deductible. The plan does not provide any express limit on out-of-pocket expenses. The maximum out-of-pocket expense limit for family coverage is $10,500 ($10,200 for 2005). The plan is not an HDHP for a family with six or more covered individuals because the amount that these individuals pay in out-of-pocket expenses exceeds the maximum out-of-pocket threshold under Code Section 223 ($2,100 X 6 ($12,600) exceeds $10,500). However, the out-of-pocket expense limit of $10,500 for any family with two to five covered individuals is not exceeded because the amount that these individuals pay in out-of-pocket expenses would not exceed the maximum out-of-pocket threshold under Code Section 223 ($2,100 X 5 ($10,500) equals, but does not exceed $10,500). [i.R.S. Notice 2004-50, Q&A 20 (ex. 1), 2004-33 I.R.B. 196]

Example 2. In 2006, a plan which otherwise qualifies as an HDHP provides family coverage with a $2,100 deductible for each family member. The plan pays 100 percent of covered benefits for each family member after that family member satisfies the $2,100 deductible. The plan includes an umbrella deductible of $10,500. The plan reimburses 100 percent of covered benefits if the family satisfies the $10,500 in the aggregate, even if no single family member satisfies the $2,100 embedded deductible. The out-of-pocket maximum ($10,500 for 2006) is not exceeded and the plan qualifies as an HDHP for the family, regardless of the number of covered individuals. [i.R.S. Notice 2004-50, Q&A 20 (ex. 2), 2004-33 I.R.B. 196]

Source: Health Savings Account Answer Book (chapter 3), 2nd Edition, Aspen Publishers (in Press).

The HSA Contribution Limit Chart is attached.

COLA_HSA_06.pdf