Treasury Department Issues New Coverage Guidelines for Health Savings Accounts

The Treasury Department on Tuesday issued new guidelines for health savings accounts that would allow consumers to use them to cover the cost of some preventive care services and prescription drugs, USA Today reports (Appleby, USA Today, 3/31). Under the new Medicare law, HSAs, which allow consumers to save funds tax-free for future medical expenses, are available to members of health plans that have an annual deductible higher than $1,000 for an individual and $2,000 for a family (California Healthline, 3/5). The law allows consumers to deposit the amount of the annual deductible -- this year a maximum of $2,600 for individuals and $5,150 for families -- into HSAs. Under the new guidelines:

Employers and health insurers can only offer HSAs in conjunction with policies that require consumers to pay deductibles before coverage begins. However, the requirement exempts coverage for annual physicals, immunizations, smoking cessation programs, obesity treatments and other preventive care services.

Employers and health insurers can offer HSAs in conjunction with policies that cover some prescription drug costs before consumers pay deductibles until 2006, after which time they can offer HSAs only in conjunction with policies that require consumers to pay deductibles before prescription drug coverage begins.

Consumers who open HSAs by April 15, 2005, can receive reimbursement for 2004 medical expenses because few employers and health insurers likely will offer HSAs this year.

According to Gregg Lehman, CEO of health management services company Gordian Health Solutions, the new guidelines likely will increase the popularity of HSAs. He added, "Employers were taking a wait-and-see attitude, but now that there's more clarification, I think you'll see them looking" at HSAs (USA Today, 3/31).

OPM Discusses HSAs With Federal Employee Groups

In related news, Office of Personnel Management officials this week will meet with representatives of federal employee and retiree groups to discuss how HSAs might affect enrollment in the Federal Employees Health Benefits Program. The National Association of Retired Federal Employees maintains that HSAs could "siphon off younger and healthier enrollees from the more traditional plans and leave them with a higher share of the sick and ailing," which could force FEHBP to raise premiums, the Washington Post reports (Barr, Washington Post, 3/31).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.