New HSA/HDHP/out-of-pocket maximums for 2013

The IRS has announced adjustments that affect Health Savings Accounts (HSA) and High Deductible Health Plans (HDHP) in 2012.

Quick background information
An HSA is a fund employees can use to build up tax-free dollars to pay for current and future qualified medical expenses, as well as future retiree health expenses. Individuals can choose to spend any accumulated dollars on expenses as they arise, or save the dollars for later withdrawal. To be eligible for an HSA, an employee:

• Cannot be enrolled in Medicare
• Cannot be a dependent on someone else’s tax return
• Must be covered by a qualified High Deductible Health Plan (HDHP) in 2013.

What you need to know now
The amount employees can contribute to an HSA has been increased for 2013. The contribution limits are:

• Individuals (self-only coverage) — $3,250
• Family coverage — $6,450

The minimum-required deductibles for HDHP plans have been increased for the first time in three years, to these limits:

• $1,250 for self-only coverage
• $2,500 for family coverage

The maximum amount an employee can pay for out-of-pocket expenses also has been increased for 2013. This out-of-pocket amount includes deductibles, co-payments, and other amounts, but not premiums.

• $6,250 for self-only coverage
• $12,500 for family coverage

Important HSA reminders

• Due to health care reform regulations, employees may only be reimbursed for over-the-counter medical purchases with HSA funds if they have a prescription for the item.
• An employee has the right to withdraw money from an HSA for any reason, but will face a tax penalty if the money is used for non-qualified medical expenses. The tax penalty is 20% of the amount the employee withdraws from the HSA.

Impact on employees and individuals — The IRS changes can give consumers access to additional funds to cover qualified expenses and increases in medical expenditures. However, the rule regarding over-the-counter purchases may require additional copays to cover doctor’s visits, so employees can get prescriptions for those over-the-counter medications.

Impact on employers — Employers are required to communicate this change to employees, and will need to make sure their health insurance deductibles and HSA plan comply with the new regulations.

Impact on brokers — Brokers will need to work with their clients to communicate this change to employees and make sure the health insurance plan design they present is within the new guidelines.

A growing health care strategy
HSA accounts are becoming more popular with the growth of HDHPs and consumer-directed health plans. Employers often combine a High Deductible Health Plan with lower premiums, with an HSA and voluntary benefits — like accident or critical illness — which let employee’s choose the coverage they need to offset their potential financial risk.

For more information on HDHPs and HSAs ask your Unum representative for a copy of Unum’s report “Consumer-directed health plans: Cost control strategies for the health reform era.”