HSA FAQ
Blue Cross and Blue Shield of North Carolina®
1. Do I have to have a high-deductible health plan (HDHP) to open an HSA?
A: You must be covered by an HDHP to open an HSA, either by your own or someone else’s. If you later disenroll from your HDHP, enroll in Medicare, or become covered by a non-HDHP, you can keep your HSA, and continue to use the remaining funds, but you can no longer contribute to it.
2. Can I have other health coverage in addition to my HDHP?
A: To open and contribute to an HSA, you cannot be covered by any plan in addition to your HDHP except for:
- Dental or vision coverage
- Long-term care coverage
- Accident/disability coverage
- Hospital Insurance Plan (HIP)-type coverage or disease specific coverage
You can be covered by more than one HDHP and still be eligible to contribute to an HSA.
3. Does the HDHP policy have to be in my name to open an HSA?
A: No. The policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible for an HSA even if the policy is in your spouse's name.
4. If a married couple is enrolled on a family HDHP, can they open a joint HSA?
A: No. HSAs are all individual accounts. A husband and wife enrolled on a family HDHP can do the following:
- Open individual HSAs and contribute to both, but the collective total of both must not exceed the family contribution maximum.
- Open an HSA in one spouse's name and contribute up to the family maximum.
- Even though HSAs are individual accounts, the funds in the HSA can be used for any family member's eligible medical expenses.
5. I don't have a job, can I have an HSA?
A: Yes, if you have coverage under an HDHP. You do not have to have earned income from employment. Contributions can be from your own personal savings, dividends, unemployment or welfare benefits, etc.
6. Does my income affect whether I can have an HSA?
A: There are no income limits that affect HSA eligibility. However, if you do not file a federal income tax return, you may not receive all the tax benefits offered by an HSA. HSA contributions, earnings and distributions for eligible medical expenses are not taxed.
7. Can I start an HSA for my child?
A: No. You cannot establish separate accounts for your dependent children, including children who can legally be claimed as dependents on your tax return. You can use your (or your spouse's) HSA funds to pay for your child's eligible medical expenses, however, as long as they are claimed as a dependent on your tax return.
8. I'm a single parent with HDHP coverage but have a child/relative that can be claimed as a dependent for tax purposes, and this dependent also has non-HDHP coverage. Am I still eligible for an HSA?
A: Yes. You are still eligible for an HSA. Your dependent's non-HDHP coverage does not affect your eligibility, even if they are covered by your HDHP. You can use your HSA to pay for your and your child's eligible medical expenses (even though your child is not covered by an HDHP). Keep in mind that to be an eligible medical expense, the expense must be an actual out-of-pocket expense (not paid by health insurance).
9. My spouse has an FSA or HRA through their employer, can I have an HSA?
A: You cannot have an HSA if your spouse's FSA or HRA can pay for any of your medical expenses, other than vision or dental, before your HDHP deductible is met.
10. Who may contribute to an HSA?
A: Anyone can contribute to an HSA on your behalf including your family.
11. When can contributions to an HSA be made?
A: Contributions to an HSA can be made at any time during the year in any increment, including:
- All at once at the beginning of the year
- All at once at the end of the year
- In equal amounts during the year
Contributions to an HSA can be made through April 15 of the following year. For example, contributions for 2008 can be made through April 15, 2009.
12. What are the annual contribution limits?
A: Contribution limits are established based on IRS guidelines and are related to your health plan deductible. These limits will be updated each year by the federal government to account for inflation.
- In 2011, the maximum annual contribution is $3,050 for individual and $6,150 for family. Rollover amounts from previous years and/or medical savings account or another HSA, do not count toward the maximum annual contribution. Additionally, those between the ages of 55 and 64 can contribute an additional $1000.
- Additionally, those between the ages of 55 and 64 can contribute an additional $900 in 2008 above the maximum to their HSA. This "catch-up" allowance is scheduled to increase to $1000 for 2009 and beyond.
13. What happens if I exceed the annual limit?
A: Contributions made to your HSA that exceed the contribution limits are not tax-free. In addition, an excise tax of 6% for each taxable year is imposed on excess contributions. You can avoid the excise tax on excess contributions by withdrawing excess contributions before the last day prescribed by law (including extensions) for filing your federal income tax return for the taxable year.
14. Can I make contributions if I am not enrolled in an HDHP for the entire year?
A: Yes. However, the maximum amount that you can contribute to your HSA is prorated based on the number of months you are enrolled in an HDHP. For example, if you have HSA coverage under an HDHP that starts on June 1 and continues through December 31, you are eligible to make 7/12 of the maximum annual contribution.
15. I'm enrolled in Medicare. Can I contribute to an HSA?
A: No, but if you have an existing HSA, you can use those funds for eligible medical, long-term care and retiree expenses. After you turn 65, if you use funds to pay for noneligible expenses, the funds will be counted as taxable income, but the 10% penalty normally imposed will be waived.
16. Can HSA funds be invested?
A: Yes. When your account balance reaches a certain amount, you can invest the excess funds. The same types of investments permitted for IRAs are allowed for HSAs, including stocks, bonds, mutual funds, and certificates of deposit.
17. If my spouse and I each have individual HDHP coverage, how much can we contribute?
A: Each spouse is eligible to contribute to an HSA in their own name, up to the amount of the deductibles under their respective policies. However, each spouse's contribution cannot exceed the individual contribution limit which is subject to change on an annual basis.
18. If my spouse or I have family coverage, how is the contribution limit computed?
A: If either spouse has family coverage under an HDHP, you both are treated as having family coverage. If each spouse has family coverage under separate health plans, your contribution limit is the lesser plan deductible amount, divided equally between both of you unless you agree on a different division of funds.
19. I turned 55 this year. Can I make the full "catch-up" contribution?
A: If you had HDHP coverage for the full year, you can make the full catch-up contribution regardless of when your 55th birthday falls during the year. If you did not have HDHP coverage for the full year, you must prorate your "catch-up" contribution for the number of full months you were eligible.
20. If my spouse and I are both 55 and older, can we each make the "catch-up" contribution?
A: Yes, if both spouses are eligible individuals and both spouses have established an HSA in their name. If only one spouse has an HSA in their name, only that spouse can make a "catch-up" contribution.
21. What can HSA funds be used to cover?
A: HSA distributions are tax-free if used for eligible medical expenses as defined by Internal Revenue Code Section 213(d). Noneligible distributions will be taxed as part of gross income and will incur a 10% penalty. After age 65, the 10% penalty is dropped, though the distribution is still treated as taxable income. Eligible medical expenses include doctor's office visits, predeductible amounts and coinsurance.
- Review a list of eligible medical expenses
- Review a list of noneligible medical expenses
22. Are health insurance premiums eligible medical expenses?
A: Generally, health insurance premiums are not eligible medical expenses, except for the following:
- Qualified long-term care insurance
- COBRA health care continuation coverage
- Health care coverage while you are receiving unemployment compensation
In addition, if you are over age 65 you may use HSA funds to pay the following premiums:
- Medicare Part A and/or B
- Medicare Prescription Drug Coverage
- Medicare HMO
- Premiums for employer-sponsored health insurance, or employer-sponsored retiree plan
Note: Medicare Supplemental policy premiums are not eligible medical expenses.
23. If I am no longer enrolled in an HDHP, can I still use my HSA?
A: Yes. You do not have to be enrolled in an HDHP to use your HSA. If you enroll in Medicare or become covered by a non-HDHP, you can still use the remaining balance of your funds. However, you can only make contributions to an HSA if you are enrolled in an HDHP.
24. Are claims incurred prior to the establishment of the HSA eligible for reimbursement from the HSA?
A: No. Your HSA is established on the effective date of your Blue Options HSA policy. However, to officially activate your HSA, you must send in your signature card. If you delay, the IRS may infer you intended to open your account at a later date.
25. Who can use funds from my HSA?
A: HSA funds can be used to cover eligible medical expenses for:
- The account holder
- The account holder's spouse
- Any other dependent
You do not need to be covered by an HDHP nor do you have to be covered by the HSA account holder's plan in order to use HSA funds.
26. What is the tax treatment of my HSA contributions?
A: Any contributions you make to your HSA (subject to the contribution limits) are tax-deductible regardless of whether you itemize deductions. However, you cannot also deduct the contributions as medical expense deductions under section 213(d). We recommend that you check with your tax advisor for additional details regarding the tax treatment of HSAs.
27. What is the tax treatment of HSA contributions made by a family member on my behalf?
A: HSA contributions made by a family member on your behalf are tax-deductible when you are computing your adjusted gross income.
28. What is the estate treatment of HSAs?
A: If you are married, your spouse becomes the owner of the HSA when you die. If you are unmarried, the HSA becomes part of your taxable estate.
29. What if my provider over-collects at the time of service?
A: You should contact your provider to determine how they plan to refund you. You will also need to make sure that the funds are returned to the HSA, or allocated to other eligible expenses, to avoid tax penalties associated with using funds for noneligible medical expenses.
30. What will a provider collect if I am a Blue Card® member and see a BlueCard network provider out of state?
A: The amount you are charged for services outside of North Carolina will vary by provider. Blue Cross and Blue Shield of North Carolina® plans in other states set their own policies and contracts with providers in other states. Therefore, it is important to ask the provider about payment policies before scheduling an appointment or procedure outside the state.
31. What happens when I go to a participating pharmacy?
A: Just present your Blue Cross NC ID card and the pharmacy will look up your eligibility and claims information. You will pay what you owe at the pharmacy. Before you reach your deductible, you are responsible for the total Blue Cross NC discounted rate. After you meet your deductible, you are responsible for the applicable coinsurance amount. All pharmacy claims will be applied to your overall deductible, along with your medical claims.
32. What is the "welcome kit" from Mellon?
A: When a customer applies for Blue Options HSA, s/he applies for both a health care plan and a health savings account. Blue Cross NC administers the health care benefits and Mellon Trust of New England administers the banking and investment options. Mellon sends Blue Options HSA members a welcome kit to explain the HSA. The welcome kit includes a signature card, that you should return in order to activate your HSA.
33. Why haven't I received my Mellon welcome kit for my HSA?
A: The USA Patriot Act requires Mellon to obtain the residential street address of its HSA account holders. If the address you provided during the Blue Options HSA enrollment process included a P.O. Box, Mellon will be unable to open your HSA until you provide a valid document bearing your current residential address. Valid documents include: driver's license, utility bill showing your name and place of residence, passport or government-issued photo ID card. Mellon will contact you by mail for this information. If you return a copy of the requested document within 10 days of receipt of the letter, your HSA account will be opened. Otherwise, you will not receive a Mellon Welcome Kit and will be unable to open an HSA.