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FAQ
An HSA is a tax-exempt trust or custodial account established for the purpose of paying qualified medical expenses. It allows you to pay for current health care expenses and to save for future qualified medical expenses and retiree health expenses, tax free.* The money you invest in an HSA is tax deductible and any earnings on your HSA contributions accumulate tax free. The money in your account can be withdrawn tax free and without penalty at any time to pay for qualified medical expenses. Unused balances roll over from year to year.
To be eligible to make a contribution to an HSA, you must be covered by a qualified deductible health plan, also known as a high deductible health plan. Also, you generally may not be covered by other health insurance that is not a qualified deductible health plan, with certain exceptions. Some of the exceptions include workers' compensation, specific injury insurance, and insurance for accidents, disability, dental care, vision care, or long-term care. You are not eligible for an HSA if you are enrolled in Medicare claimed as a dependent on someone else's tax return or if you have received medical benefits from the Veterans Health Administration at any time over the past three months.
You can sign up for an HSA with any HSA trustee, including insurance companies, banks, and other approved HSA providers. If you do not have a preferred HSA trustee, Kaiser Permanente has selected Wells Fargo as the preferred provider.
For more information, please visit www.wfhbs.com/kaiserpermanente/
Getting started is easy. Just follow the steps below:
Step 1: Register and apply online on our secure Web site: kp.org.
Step 2: Choose the person(s) you want to cover.
Step 3: Choose a deductible plan with HSA option.
Step 4: Complete a medical questionnaire for yourself and for each family member applying for coverage. You can complete the questionnaire(s) online, or you may print it out and mail it in with your application.
Step 5: Submit your application. After completing steps 1 and 2, you can submit your application online using our secure Web site. Or, if you printed out the application in step 4, you can mail it to us.
Step 6: When we receive your application, we'll notify you of its status by mail. Once you're approved for membership, we'll send you a Member Resource Guide and your ID card.
Step 7: Once you are approved for membership in an HSA-qualified health plan, you can open an HSA with our preferred provider, Wells Fargo, or with an HSA trustee of your choice.
Kaiser Permanente has made arrangements for Wells Fargo (a qualified HSA trustee) to make its HSA services available to our health plan members. You can also establish an HSA through any qualified trustee of your choice. If you choose to open an account with Wells Fargo, you can:
You, your family members, and your employer are all permitted to contribute to your HSA. The same annual limits on the contributions made to your account apply, regardless of who makes the contributions.
All contributions to your HSA are tax deductible, whether you itemize or not.
The money in the HSA belongs to you. If you leave an employer who has made contributions, the money in your HSA account goes with you.
Annual contributions for 2007 are capped at $2,850 for individual coverage and $5,650 for family coverage, or your deductible—whichever amount is less. For 2008 and after, these maximums will be indexed for inflation. The amount you may contribute also depends on the number of months you are covered by a qualified deductible plan during the year.
If you become covered in the middle of the year, your maximum monthly contribution is determined by first dividing your annual contribution by 12. The maximum you can contribute for that year is then calculated by multiplying your maximum monthly contribution by the number of full months of your enrollment in a qualifying deductible plan.
For example, if you become enrolled in the qualifying deductible plan on July 1 and have an annual deductible of $2,500, then your maximum monthly contributions would be $208.33 ($2,500 divided by 12). The maximum you could contribute for that year would be $1,249.98 (208.33 x 6 months).
Yes. If you are between 55 and 64 years of age, you can make additional catch-up contributions. You may want to consider making these extra contributions in anticipation of medical expenses that will not be covered under Medicare, such as a portion of prescription drug costs or Medicare Part A and Part B premiums. The schedule for additional catch-up contributions to an HSA is as follows:
2006: $700
2007: $800
2008: $900
2009 and after: $1,000
Note: Contributions must stop once you are enrolled in Medicare. If both you and your spouse are eligible, you may both make catch-up contributions.
HSA funds are intended to be used for certain out-of-pocket medical expenses such as deductibles, copayments, coinsurance, and qualified medical expenses that are not covered by your qualified deductible plan or other permitted insurance. While funds can be withdrawn for any purpose, the amount withdrawn is taxable if it is used for anything other than qualified medical expenses. It will also be subject to a 10% penalty by the IRS if used for non qualified expenses before you reach age 65. After age 65, however, the 10% penalty does not apply, though it will be taxed.
Qualified medical expenses include the expenses defined in Section 213(d) of the Internal Revenue Code that you pay for your own medical care and that of your spouse and dependents. Some examples of medical expenses that qualify for favorable tax treatment for HSA purposes include:
- copayments
- deductibles
- doctor visits
- ambulance and hospital services
- prescription drugs and certain over-the-counter medications
- durable medical equipment such as hearing aids
- dental care
- orthodontics
- eyeglasses and LASIK
- acupuncture
- chiropractic services
- certain long-term care services and limited long-term care premiums
- COBRA health care continuation coverage
- health insurance premiums for individuals receiving unemployment
compensation
- Medicare Part A and Part B premiums, Medicare HMO premiums, and your
share of premiums for employer-sponsored health insurance, if you're over 65
A medical expense is not a qualified medical expense if you receive reimbursement for it under your insurance coverage. Also, if an expense is paid or reimbursed by your HSA, you cannot include that expense for purposes of determining your itemized tax deductions.
Yes, as long as these are eligible under the current rules. For example, cosmetic procedures, like cosmetic dentistry, are generally not eligible and would not be considered qualified medical expenses.
No. The only exceptions are COBRA health care coverage, limited long-term care insurance premiums, and health insurance premiums while receiving unemployment compensation. Also, if you're over 65, you can use HSA funds for Medicare Part A and Part B premiums, Medicare HMO premiums, and your share of premiums for employer-sponsored health insurance.
Yes. You are expected to maintain records of your medical expenses to show that the distributions have been made exclusively for qualified expenses. If you do not maintain the necessary records, you may be subject to taxes and penalties on the distributions made from your account.
No. Your unused HSA dollars will roll over year after year. In addition, you can take the balance with you if you change jobs or enroll in a different health plan.
Once you're 65, the amounts can be used tax free for qualified medical expenses and to pay certain insurance premiums, like Medicare Part A and Part B, Medicare HMO, and your share of retiree medical insurance premiums. (It cannot be used to purchase a Medigap policy.) If used for permitted expenses, the amounts come out of the account tax free. If used for other expenses, the amount received will be taxable.
* The tax references contained in this document relate to federal income tax only. The tax treatment of health
savings account (HSA) contributions and distributions under your state's income tax laws may differ from
the federal tax treatment, and from state to state. Consult with your financial or tax advisor for
more information.
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