Network vs Non-Network Deductibles

[Guest cjherman]

Our HDHP plan has separate deductibles for network and non-network providers ($4000 vs $8000 for family coverage). Which deductible would be used for determining the maximum HSA contribution? ($4000 or $5450 for '06)

Additionally, the max out-of-pocket for non-network coverage ($16000) appears to violate the out-of-pocket limit for '06 - would this affect which deductible gets used for the contribution calculation? Thanks in advance.

[leevena]

Question is moot. The most you can contribute is either the deductible amount or the amount allowed by the IRS, whichever is less. The amount allowed by IRS is 2,700 for individuals and $5,450 for families for the year 2006.

Each year the amounts iwll increase.

[namealreadyinuse]

The limit will always be based on the lower deductible (in-network), but I agree that it doesn't matter in your case.

FYI, the 2007 amounts should be $2,850 (a $150 increase from 2006)/$5,650 (a $200 increase from 2006).

[Guest cjherman]

Thanks. Can you elaborate on why the in-network deductible applies? I'm also not sure why it's a moot point - According to my calculations, if the non-network deductible applied I would be able to make an additional $1450 contribution for '06.

ie:

in-network deductible applies: the lesser of $4000 or $5450 = $4000

non-network deductible applies: the lesser of $8000 or $5450 = $5450

[leevena]

It is a moot point because the regs say the individual can deposit into their HSA account the lesser of the two, either the deductible or the maximum amount allowed by the IRS. Your 2006 Individual Deductible is $4,000 while the allowable HSA contribution for an indivudal is $2,700. The lesser amount is $2,700. Same would be true for the family.

Something else to keep in mind about the deductibles and if you have coverage for more than 2 people, meaning you have coverage for 3 or more. There are two types of HDHP available for sale in the US. The more popular one is based on the old MSA laws that required the FULL FAMILY deductible be satisfied before the HSA funds could be used. I'll use me as an example (EE, Spouse, and two children), and your plan ($4,000 individual and $8,000 family deductible.). If I incur the first claim of the plan year, I must have satisfied the Family Deductible amount ($8,000) before I use my HSA funds.

The second approach, often time referred to as a "corridor deductible' eliminates that requirement and allows me to satisfy the Single Deductible only ($4,000) and then I can access the HSA funds.

As for your last comment in the original posting "Additionally, the max out-of-pocket for non-network coverage ($16000) appears to violate the out-of-pocket limit for '06 - would this affect which deductible gets used for the contribution calculation?", I know of no requirments. In fact, if you look closely at your OON benefits, there is a good chance that you may very well have much higher out of pocket expenses because of what expenses are recognized as eligible.

[Guest cjherman]

I think maybe my initial post wasn't too clear. My plan provides the following:

Network Deductible / Network OOP / Non-network Deductible / Non-network OOP

Individual: $2000 / $2000 / $4000 / $8000

Family: $4000 / $4000 / $8000 / $16000

I guess what I'm looking for is a reference to the appropriate IRS regs that state the relationship between deductibles, max OOP and the maximum HSA contribution for '06. Thanks again for your help.

[Guest cjherman]

Looks like I found the answer to my question:

MEDICARE PRESCRIPTION DRUG,

IMPROVEMENT, AND MODERNIZATION ACT

OF 2003

TITLE XII—TAX INCENTIVES FOR

HEALTH AND RETIREMENT SECURITY

SEC. 1201. HEALTH SAVINGS ACCOUNTS.

26 USC 223 ©(2)(D)(i & ii):

‘‘(D) SPECIAL RULES FOR NETWORK PLANS.—In the case

of a plan using a network of providers—

‘‘(i) ANNUAL OUT-OF-POCKET LIMITATION.—Such

plan shall not fail to be treated as a high deductible

health plan by reason of having an out-of-pocket limitation

for services provided outside of such network

which exceeds the applicable limitation under subparagraph

(A)(ii).

‘‘(ii) ANNUAL DEDUCTIBLE.—Such plan’s annual

deductible for services provided outside of such network

shall not be taken into account for purposes of subsection

(b)(2).

[Jacmo]

Everybody now understands of course that contributions are no longer limited to the "lesser of" deductible or reg. max. Eff. Jan. 1st everyone can make the max contribution of 2850 or 5650 regardless of the deductible, due to changes in the law made 12/9 for 1/1/07.

[MARYMM]

Everybody now understands of course that contributions are no longer limited to the "lesser of" deductible or reg. max. Eff. Jan. 1st everyone can make the max contribution of 2850 or 5650 regardless of the deductible, due to changes in the law made 12/9 for 1/1/07.

This will be true once the current occupant signs the bill

[Jacmo]

MaryMM: Don't you kinda think he will, since he is a Republican and HSAs are a Republican "pet"?