Health Savings Account (HSA)

A HSA is available only when you enroll in one of the High Deductible Health Plans (HDHP) medical plans. HSAs are designed to allow individuals to use tax-favored contributions to pay for eligible health care expenses./p>

How HSAs Work

When you elect coverage under one of the HDHP options, you will be able to establish an HSA. This account can help you pay for eligible health care expenses for you and your family, along with expenses not covered by the plan, such as your deductible.

If you are an active employee, you may contribute up to $3,350 for individual coverage and $6,750 for family coverage (total between you and your employer) on a pre-tax basis. If you are 55 or older, you can also make an additional $1,000 "catch-up" contribution. All money deposited into your account, either by you or your employer, will earn interest just like a savings account, but on a tax-free basis. You will still be able to use the money that remains in your account to pay for qualified expenses even after your stop participating in a HDHP, so you can use your account to save for health care expenses you may experience in the future.

When you enroll in an HDHP, you pay expenses out of your own pocket until you meet the annual deductible (there are exceptions for certain preventive medications and medical services that are not subject to the deductible). Then the plan starts to pay benefits.

Special Note: There are certain HSA eligibility requirements, restrictions, and tax considerations dictated by the IRS. For more information, call the HSA administrator, Health Equity, at (866) 346-5800 or visit http://www.healthequity.net/apehp..

Eligible Health Care Expenses

An HSA helps you pay for certain health care expenses that are not otherwise covered by the plan, including your annual deductible. In general, eligible health care expenses include any non-reimbursed medical, dental, or vision expense that can be deducted on your individual tax return if you itemize deductions (Eligible deductions are described in IRS Publication 502), for example:

  • Co-payments and coinsurance amounts;
  • Prescription drugs;
  • Additional amounts you pay when you do not use an in-network provider (for example, amounts over “reasonable and customary”); and
  • Medicare premiums (including Part A, Part B, Part D, and Medicare managed care) or employer-sponsored health coverage premiums, including premiums for post-employment COBRA coverage.

Deductible Requirements for HDHP Participants

Participants enrolled in the HDHP medical plan option must first meet the annual deductible before the plan pays benefits for medical and prescription drugs. Medications that are exempt from meeting the deductible requirement include preventive medications for hypertension, high cholesterol, and other conditions. Visit our partners page for a complete list of medications that are exempt from this requirement.

How to Enroll in a HSA

If you elect the HDHP medical option, there are additional enrollment materials you will need to complete to have your HSA established. Contact Arizona Public Employers Health Pool at (800) 718-8328 for more information.

Getting Reimbursed

The amount available to you to pay eligible healthcare expenses cannot exceed the amount in your HSA at the time of withdrawal. If you pay for expenses through your HSA, you cannot deduct that expense on your individual tax return. Also, if you use the money in your HSA for a non-eligible expense, that distribution will be taxed, generally with a 20% penalty. When you enroll in the HDHP option, you will receive more information about how to access the money in your HSA to pay for eligible healthcare expenses, as well as how you can make contributions, if eligible. In many instances, paying for eligible healthcare expenses from your HSA is as easy as using your special HSA debit card.

Once money is deposited in your HSA, it's yours-even when you are no longer eligible for coverage under the plan. If you don't use all the money in your account, your account balance will continue to grow each year-and you won't have to pay taxes on any interest earned. This money can be used in years when you have larger healthcare expenses. Or at retirement, you can use the money to help pay for retiree healthcare expenses. There is no "use-it-or-lose-it" provision; the money in your account is yours until you choose to use it.

Tax Considerations

With a HSA, you are responsible for determining whether or not an expense is eligible to be paid from your HSA. In addition, you cannot claim a tax deduction for any healthcare expense reimbursed from your HSA. The IRS determines the types of healthcare expenses that are allowed for reimbursement from a HSA.