The New Year is now just weeks away and with it will come the phone calls and emails from your clients asking about the new contribution limits for health savings accounts (HSA). This year, get out ahead of the inquirers and send a link to this article to your clients who have HSAs. They will thank you for it.

For the past two years HSA contribution limits have remained static with the single contribution set at $3,050; $6,150 for families, and an additional $1,000 catch-up contribution for those 55, and older. However, contribution limits will once again change for 2012, as dictated by the results on an annual calculation for inflation factors.

For calendar year 2012, the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan will be $3,100. The annual limitation on deductions for an individual with family coverage under a high deductible health plan is $6,250. The catch-up contribution for those 55 or older will remain at $1,000. This should be great news to people who want to maximize their pre-tax savings and invest more for their future healthcare needs.

[See also: 2012 HSA and FSA cheat sheet]

Keep in mind that contributions for the 2011 tax year can be made up until April 15, 2012. Just be sure that the HSA trustee is notified what the contribution is for 2011.

For more information about the 2012 contribution limits, download the IRS document.

What is a high deductible plan?

The IRS’s definition of a qualified high deductible plan will remain the same for 2012 as it was for 2011. For calendar year 2012, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,200 for self-only coverage or $2,400 for family coverage, and the annual out-of pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,050 for self-only coverage or $12,100 for family coverage.

Keep in mind that to be qualified to open and fund the HSA, a member generally cannot have any other health coverage that is not an HDHP. However, they can still be an eligible individual even if their spouse has non-HDHP coverage provided the HDHP member is not covered by that plan. Caution: this can be a problem if the spouse has a flexible spending account (FSA) since there is no way to restrict which family members can receive reimbursement for qualifies medical expenses.

The rules do allow for some additional insurance benefits, but only for the following items:

• Liabilities incurred under workers’ compensation laws, tort liabilities, or liabilities related to ownership or use of property.

• A specific disease or illness.

• A fixed amount per day (or other period) of hospitalization.

It is also possible to have coverage for the following items:

• Accidents.
• Disability.
• Dental care.
• Vision care.
• Long-term care.

Last Month Rule and Testing Period

One additional point to convey to plan members about contributions to HSAs is something called the “Last Month Rule.” Under the last-month rule, an eligible individual on the first day of the last month of the member’s tax year (Dec. 1, for most taxpayers), is considered an eligible individual for the entire year. They are treated as having the same HDHP coverage for the entire year as they had on the first day of that last month. This means that someone who becomes eligible on Dec. 1, 2011, and has family HDHP coverage on that date can immediately contribute $6,150 to their HSA, and then add another $6,250 on Jan. 1, 2012.

However, if contributions are made to the HSA based on being an eligible individual for the entire year under the last-month rule, there, is a “Testing Rule” that will come into play. The Testing Rule says that the member must remain an eligible individual during the testing period. For the last-month rule, the testing period begins with the last month of the member’s tax year and ends on the last day of the 12th month following that month. For example, Dec. 1, 2011, through Dec. 31, 2012.

If the member fails to remain an eligible individual during the testing period, other than because of death or becoming disabled, they will have to include in income the total contributions made to their HSA that would not have been made except for the last-month rule. They are required to include this amount in their income in the year in which they failed to be an eligible. This amount is also subject to a 10 percent additional tax.

For more information about the Last Month Rule and Testing Period, download IRS publication 969: http://www.irs.gov/pub/irs-pdf/p969.pdf

About the Author

By Marty Trussell         December 21, 2011

Marty Trussell is seasoned employee benefits professional who tracks health plan innovations at http://www.healthplaninnovation.com. You can connect with him on LinkedIn at: http://www.linkedin.com/in/martytrussel

New AHIP Survey Shows that more Americans have HSA’s than ever

HSA enrollment jumps to 11.4 million

By Marli D. Riggs                                                         June 16, 2011

Enrollment in health savings accounts jumped to more than 11.4 million as of Jan. 1, 2011, according to an annual census released June 14.

Between January 2010 and January 2011 the fastest growing market for HSA/HDHP products was the large employer group, with almost 2 million enrollees. The individual group market increased by 300,000 enrollees and small group coverage decreased by more than 200,000 the survey reports.

The annual census, conducted by America’s Health Insurance Plans, acknowledges states with the highest percentage of HSA enrollees younger than 65 with private health insurance:

• Minnesota (14.9%)

• Vermont (11.4%)

• Colorado (11.3%).

The states with the lowest percentage were:

• Hawaii (0.2%)

• West Virginia (2.1%)

• Mississippi (2.4%)

According to surveys, HSA growth can be contributed to premiums for high-deductible health insurance plans, which the law requires be linked to HSAs, tend to be lower than more traditional health plans.

AHIP received participation from mostly all private health insurance carriers in the HSA/HDHP market for this census. The census did not track participation in health reimbursement arrangement (HRA) products.

For a copy of the full report  go here – http://www.ahipresearch.org/pdfs/HSA2011.pdf

Check out this report from May 2010

http://web.mail.com/32447-111/mmc-2/en-us/Suite.aspx

North Carolina is the first to require all students to have their own health insurance policy

Recent news from the trustees of the NC University System indicated that the policy for all NC University System students will be a requirement that all students have some form of health insurance policy. They obviously favor their own internal insurance policies but others will be accepted. See the whole article here http://www.wral.com/news/education/story/7296998/

With all of the turmoil surrounding so-called healthcare reform, wouldn’t it make sense to insure your own children while providing them a tax favored leg up with a Health Savings Account coupled with their own personal health insurance policy?

We can help! The Original GIFT HSA, www.theorginalgifthsa.com, is your Health Services Connector. With one stop you can:

1. Set up your child’s Health Savings Account and fund it up to $3,050 in 2010!
2. Automatically contact up to five health insurance agents in your neighborhood to, using InsureMe.com, ensure the best for your child
3. Obtain a FreeRx Discount Prescription card
4. Obtain a HSA Rewards card
5. Subscribe to COMPASS PHS program where you obtain the best prices and best doctors for any desired or needed health service

So, get ready for change by starting your children out right, visit our website and provide peace of mind to not only you, but to your cherished child.

You can also call 860-563-5500 x 302 for more information.

Who says that American Healthcare is too costly?

There are some thought provoking ideas in the article written for Business Week by the Harvard professor, Clayton Christensen. But he misses the point as so many have in this debate. A lesson learned from the Clintonistas is that one must examine the proposition posed by those who demand change in their way. If we are to examine the statements that our healthcare system is too costly then we miss an all American point which is that the premise of the whole debate is wrong.

Our medical costs are higher than other countries’ costs because we can afford them and we choose to have it as it is and want to pay for it. One only has to look at Lasik eye surgery and all of the cosmetic surgery money that has been spent. Both areas have seen reductions in costs to the consumer, not increases! Both are not covered by insurance. Our pets have a competitive pricing model, why not humans, Americans?

We have gone down a socialist rabbit hole because we accepted the proposition that it is too costly. WOW did we take that bait!

We have the best, most innovative, health and medical delivery system in the world. Other countries citizens should emulate us and demand that the same level of access, treatments, and medical professionalism be encouraged in their country!

Instead of wasting time on this socialist supported change to one of Big Government ‘solutions’, we need a new paradigm that makes it easier to efficiently fund our needs and wants, not more wasteful and expensive government oversight.

Innovative insurance models can be developed that put the wage earner in charge of the money that is earned. Why not combine Life Insurance, Annuities, and health insurance with an IRA type of account that essentially would be an HSA on steroids. By using one underwriting portal, accepting large pre-tax funding of the accounts and designing payment provisions which either act as an annuity, life insurance benefit reduction, or hybrid of that model we could innovate like has been suggested in the above referenced article.

We can to advance our funding models to take advantage of the efficiencies of the internet, like bankers have done, like mutual funds have done, like every retailer from Walmart, to Amazon.com, and others have done to bring efficiency to the consumer model.

This is an opportunity that Steve Jobs should relish! Where are those innovators? Call me, we can get this done.

It is time to refute the propositions posed by the aging big government new dealers Pelosi, Reid, and Obama. Capitalism, although not perfect, will provide the efficiency to and personal funding mechanisms that historic true and free Americans instinctively know is right.

Richard G. Willard, Jr. all rights reserved                                                9 March 2010