MCHA’s High Deductible Health Plan (HDHP) is a health plan design in accordance with specific guidelines established by the Federal Government. Enrollment in MCHA’s federally qualified HDHP permits eligible individuals the opportunity to establish a Health Savings Account (HSA).
An HSA is an account designed to help people reduce the rising cost of health care by setting aside dollars in an account that can receive tax-favored contributions on your behalf, and that allows you to take tax-free distributions to pay for current or future qualified medical expenses.
An individual can enroll in MCHA’s HDHP without establishing an HSA, but you cannot open an HSA without enrolling in an HDHP.
Enrolling in MCHA’s HDHP
New MCHA Applicants:
New applicants can choose the HDHP upon enrollment. Indicate your plan choice when you submit your MCHA application.
Current Enrollees:
Individuals currently enrolled in MCHA have the opportunity to change their MCHA plan coverage (including the HDHP) one time during a calendar year (January 1 to December 31) as follows: 1) An MCHA policyholder can change to a lower deductible plan for the effective date of January 1; or 2) An MCHA policyholder can change to a higher deductible plan during the year (on the 1st day of any month). The effective date of change will be the first of the month following the receipt of a MCHA Plan Change Request Form unless a future effective date for the first of the month is requested.
You may request the change up to the 10th day of the month prior to your requested effective date of change. For example, you have up to December 10th to request a change for a January 1 effective date. Contact MCHA Customer Service at 1-866-894-8053 for assistance in requesting a plan change, or download a Plan Change Request Form. Once you have completed the form mail it to the address listed on the form.
The High Deductible Health Plan (HDHP)
The HDHP policy is different from other MCHA deductible plans in the following ways:
- The HDHP has both an individual and family deductible amount. The current deductibles are $3,000 for an individual and $6,000 for family.
- No coverage is available for eligible services until the entire annual deductible amount is met.
- The HDHP deductible is an annual combined amount for both medical and prescription benefits (the deductible is NOT split between pharmacy and medical services).
- The HDHP has both an individual deductible and a family deductible. If the combination of incurred deductible amounts of the policyholder’s dependents equals the family deductible amount, all covered family members have 100% coverage for allowed eligible expenses through the end of the calendar year (December 31). However, if a member in the family reaches the individual deductible level prior to the family deductible being satisfied, that member will receive 100% coverage for allowed eligible expenses through the end of the calendar year.
- Only prescription drugs, some over-the-counter drugs and supplies on MCHA’s list of preferred drugs (formulary) are eligible for benefits under the HDHP. Non-preferred drugs (non-formulary) are not a covered benefit under this plan. You can view MCHA’s list of preferred drugs, which is the same as Medica’s list of preferred drugs, online at www.mymedica.com and select “Pharmacy Resources” or online at www.medica.com and select top menu item “Pharmacy” then “MCHA.”
- The HDHP provides coverage for preventive care services:
- Age 19 and older – Adult routine physical exams, routine cancer screenings, refractive eye exams, immunizations & allergy shots – 100% after the deductible has been met
- Birth through age 18 – Well child care, physical exams and immunizations – 100% the deductible does not apply
The Health Savings Account (HSA):
You are responsible for establishing your HSA and coordinating reimbursements. MCHA provides you with the HDHP, and you are responsible for your HSA. The following information is intended to provide you with general information on HSAs and does not address the complex rules, regulations and tax implications for HSAs. We urge you to seek assistance from your tax professional regarding any HSA you wish to establish.
What is a Health Savings (HSA) Account?
- A health savings account or HSA may be opened and used in conjunction with a high deductible health plan, where insurance does not cover the first-dollar medical expenses, such as the MCHA high deductible health plan (HDHP) policy.
- An HSA is owned by you and allows you to pay for qualified health expenses and save for future medical and retiree health expenses on a tax-free basis.
- An HSA is an interest-earning, tax-deductible account where funds roll over at year-end. The account follows you and into retirement.
- There are maximum annual contributions that can be made to your HSA as determined by the IRS.
How do I establish an HSA?
- An HSA must meet sophisticated requirements regarding contributions, trust management, qualified medical expenses, and the tax treatment of the accounts and distributions.
- Most financial institutions, credit unions and banks will be able to assist you with setting up an HSA.
- Most financial institutions will have various service charges for setting up and managing the HSA.
- You may be required to contribute a minimum dollar amount to open an HSA.
- You must have an established HSA before you incur health expenses if you wish to use your HSA contributions to pay for qualified medical expenses.
- You are strongly encouraged to consult with a tax professional regarding the requirements for creating and making contributions to an HSA pursuant to 26 U.S.C. 223.
What banks or financial institutions have HSAs?
- Many banks or the bank you currently use are able to open an HSA on your behalf.
- HSA Bank at www.hsabank.com is an online Internet Banking Service that specializes in HSAs. This web site also has good information on HSAs.
Am I eligible to set up an HSA?
- An eligible individual must be covered by a high deductible health plan, such as MCHA High Deductible Health Plan (HDHP) policy. The other MCHA individual deductible plan designs do not federally qualify for a HSA.
- An eligible individual cannot be covered by another health plan that is subject to the high deductible health plan limits.
- An eligible individual cannot be enrolled in Medicare.
- An eligible individual cannot be claimed as a dependent on someone else’s tax return.
- An eligible individual cannot have received Veterans Administration (VA) medical benefits at any time over the past three months.
How do I contribute to an HSA?
- You decide how much money (up to certain limits) you want to contribute each year.
- HSA contributions can be made by you or any individual, or any entity other than your employer, and are deductible on your taxes.
- Contributions can be pre-tax up to 100% of the designated annual federal maximum contribution limit as determined by the IRS.
- Contributions to your HSA account can grow over time through investment earnings, similar to an IRA.
- If you are age 55 or older, you may be able to increase your HSA contributions, as there are special “catch-up provisions”.
How do I pay for health care expenses?
- You decide how much money to use for health care expenses and which health care expenses to pay from your account.
- You may use checks, or debit, credit, or stored-value cards to take qualified HSA distributions from your account to pay for qualified medical expenses. The method used will be dependent upon the financial institution with which you set up the account.
- You can take distributions from the HSA any time; however, a financial institution may restrict the frequency of distributions and minimum amounts.
- Tax and a 10 percent penalty tax apply to non-qualified distributions (except for death, disability and attainment of age 65).
- Distributions from your HSA can be used to pay for qualified medical expenses for you, as well as your spouse and dependents, even if your spouse and dependents are not covered by the same high deductible health plan.
What are qualified medical expenses?
- HSA distributions are tax free if used to pay for qualified medical expenses as defined by IRS rules.
- Log on to www.irs.gov/pub/irs-pdf/p502.pdf for a list of services and / or expenses that are considered qualified medical expenses. You may also consult you tax professional for assistance.
- Qualified medical expenses include deductible and coinsurance amounts you pay to doctors, pharmacies, hospitals and more.
- You cannot pay MCHA premiums from your HSA – premium payments are not considered qualified medical expenses; however, distributions can be used to pay for premiums for a qualified long-term care insurance policy or for certain other premiums for an individual over the age 65.
What is the benefit of having an HSA?
- Your HSA can accumulate pre-tax contributions in an interest-earning account. Interest earned is tax-free, and distributions are tax-free if used to pay for qualified medical expenses.
- You can allow your HSA contributions to grow by investing your contributions in a variety of mutual fund investments. However, recognize that all investments carry a certain amount of risk. Talk to your financial institution about your options.
