Elimination of Annual Deductible Limitations

Currently, an individual can contribute the lesser of the deductible or the annual maximum contribution limit. This scenario becomes even more complicated when the consumer has family coverage with an embedded deductible. In this situation, a special calculation has to be done to determine the maximum contribution.

This rule simplifies contributions by eliminating the “lesser of” deductible rule by allowing HSA contributions up to the maximum annual contribution without limiting the contribution to the individual’s HDHP deductible amount.

Examples

Jim enrolls in single coverage under an HDHP on January 1, 2007 with a $1200 deductible. His plan year begins January 1, 2007 and ends December 31, 2007. Jim may contribute the maximum contribution limit which is $2850 for 2007. The prior rule would have limited his contribution to $1200, the amount of his deductible.

Nancy enrolls in family coverage under an HDHP on January 1, 2007 with a $6000 deductible. Her plan year begins January 1, 2007 and ends December 31, 2007. Nancy may only contribute the maximum annual contribution limit allowed for family coverage, which is $5650.

Carol enrolls in family coverage under an HDHP on July 1, 2007 with a $6000 deductible. Carol’s plan year begins July 1, 2007 and ends June 30, 2008. Carol may contribute up to $5650, the maximum annual contribution limit for family coverage, between July 1, and December 31, 2007. Carol may then contribute the maximum annual contribution limit for family coverage for 2008 between January 1 and June 30, 2008. If she does, when Carol enrolls in an HDHP for the following plan year (July 1, 2008 thru June 30, 2009) she cannot contribute to her HSA from July 1, 2008 thru December 31, 2008 since she already contributed her maximum annual contribution limit. If Carol doesn’t choose to enroll in an HDHP for a full 12 month period after December 31, 2007, she would be required to report any over-contributions as taxable income and would be subject to a 10% excise tax.

What are the benefits of this change?

By raising the amount individuals can contribute to their HSAs, this rule responds to the concern that many individuals must continue to pay coinsurance after meeting the deductible. Now individuals can contribute additional funds to cover these costs.

If you have questions, employers should contact their Humana Sales Representative.
Brokers should call Humana’s Spending Account Hotline at 800.281.6778.