High Deductible Health Plan Option

Healthy NY now offers a high deductible health plan for small employers, sole proprietors and individuals who meet the eligibility requirements of Healthy NY. This new option allows those insured by a high deductible health plan to establish a tax-deductible health savings account. A health savings account can be used to pay for certain medical expenses (see below for additional information on health savings accounts). Monthly premium costs for the high deductible health plan option are lower than the cost of standard Healthy NY. All health plans offer the high deductible health plan with and without prescription drug coverage.

What is a High Deductible Health Plan (HDHP)?

A high deductible health plan (HDHP) is a health insurance policy that requires the enrollee to pay for most medical expenses up to a certain dollar amount before the insurance policy begins to cover them. The 2010 deductible amounts are $1,200 for single coverage and $2,400 for family coverage. These amounts are adjusted annually for inflation.

You can access certain preventive services before you have met the deductible. In the Healthy NY program, these benefits include well-child and routine prenatal care, prostate cancer screening, mammography, cervical cytology, and adult physicals and immunizations. Copayments will still apply to these services. Money spent on copayments for preventive services do not count towards the deductible.

Money spent on medical expenses that are not covered by the HDHP will not be counted towards the plan deductible.

Small employers must choose the same option, either the high deductible plan or standard plan, for all employees covered under Healthy NY.

What is a Health Savings Account (HSA)?

The HDHP was designed to work with a health savings account (HSA). An HSA is a savings account used to pay for medical expenses such as deductibles, co-payments and over-the-counter medication. Under Federal law, you can contribute up to $3,000 into the account each year if you have single coverage or up to $5,950 into the account each year if you have family coverage. These amounts are set annually by the Federal Government. The HSA contribution limits for 2010 will be $3,050 for individuals and $6,150 for families. You can take advantage of the full contribution amount, regardless of what month you opened the account.  However, there may be a tax penalty if you end your HDHP coverage too soon.  Please see the U.S. Department of the Treasury web site for more information. You can put money into the account in one lump sum or at any frequency that is convenient for you.

Who can Contribute to an HSA?

An adult with coverage under an HSA-qualified high deductible health plan who does not have other medical coverage (other than specified disease insurance, disability, accident, dental or vision care or long-term care insurance) can contribute to an HSA. To be eligible to contribute to an HSA, the adult cannot be Medicare-eligible or be declared as a dependent on someone else’s tax return.

What are the tax advantages of an HSA?

HSAs have several tax advantages when they are used with an HDHP.  The money that you put into the HSA is tax-deductible, and it can earn tax-free interest.  As long as the money in the HSA is used for qualified medical expenses, it will never be taxed.  You may also be able to make a one-time rollover of funds from your individual retirement account (IRA), flex spending account (FSA), or health reimbursement arrangement (HRA).  Please reference the U.S. Department of the Treasury web site for more information.

How is an HSA used?

Funds deposited into an HSA may be used for any “qualified medical expense” under federal law, including dental and vision care and over-the-counter drugs. The funds generally may not be used to pay for health insurance premiums, except for COBRA continuation coverage, long-term care insurance, and Medicare premiums and associated out-of-pocket expenses.

How can you open an HSA?

An HSA must be opened with a bank or other financial institution, and there may be fees associated with it. Your health plan may have some information on establishing an HSA.

For additional information on health savings accounts, please visit the U.S. Department of the Treasury web site at www.treas.gov or http://www.treasury.gov/offices/public-affairs/hsa/.

Would you like to apply for the Healthy NY High Deductible Health Plan?

For applications, please select this link.