Healthy Explanation

The Treasury Department and the IRS last week released guidance on the use of Health Savings Accounts, the new flexible spending plans that can be used to pay health care costs.

In April, officials at the Office of Personnel Management began a search for medical insurance firms to provide health savings accounts. Federal personnel officials have been pushing HSAs as an affordable option for workers with low monthly medical bills. Workers could contribute pre-tax money into the accounts, which would accumulate and then be used to pay medical costs.

HSAs would be available to Federal Employees Health Benefits Program members who are not eligible for Medicare and who have enrolled in a high-deductible plan. The account would serve as a safety net for catastrophic injuries. President Bush and other officials have said that HSAs are beneficial because they allow employees to choose their own medical care provider. The accounts -- which were created in the 2003 Medicare Modernization Act -- also do not require participants to spend accumulated money in a particular calendar year.

The Treasury/IRS HSA guidance, issued July 23, addressed a number of commonly asked questions about the accounts, including eligibility issues, the role of high-deductible plans and contributions to the accounts. Of particular note, the guidance stipulates that a husband and wife cannot have a joint Health Savings Account.

"Each spouse who is an 'eligible individual' … and wants to make contributions to an HSA must open a separate HSA," the guidance says. "Only one person may be the account beneficiary of an HSA."

The guidance also notes that Defense personnel who are covered by the Tricare health care program are not eligible to open or contribute to a Health Savings Account.

Some lawmakers have voiced concern that the creation of HSAs will draw younger, healthy participants away from the standard FEHBP offering, which could weaken the overall plan for those who are left behind. OPM officials insist that federal workers will not flock to the HSAs, even if they are economically beneficial.

Insurance industry groups applauded the recent guidance.

"We are particularly encouraged that Treasury and IRS continue to act quickly to resolve key questions about how these plans can be structured and managed," said Paul Dennett, vice president for health policy at the American Benefits Council. "Today's guidance provides needed answers to many of the priority issues employers have asked the agency to clarify as they decide whether to offer HSAs to their employees."