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FAQs for High Deductible Health Plans, HSA, and HRA

Frequently Asked Questions for High Deductible Health Plans, Health Savings Accounts, and Health Reimbursement Arrangements

Thank your for your interest in learning more about High Deductible Health Plans (HDHP) with a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA). Each health plan has unique features. For complete details refer to the individual plan brochure, available on the Federal Employees Health Benefits Program (FEHB) website.

For a quick comparison chart showing the differences between an HSA, an HRA, and a Health Care Flexible Spending Account (HCFSA), use the Comparison Chart for HSA, HRA and HCFSA .

To view all plans available in your area, use the OPM Tool to Compare Plans by ZIP Code

High Deductible Health Plans (HDHP)

  • A High Deductible Health Plan (HDHP) is a health plan product that combines a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) with traditional medical coverage. It provides insurance coverage and a tax-advantaged way to help save for future medical expenses.

    The HDHP/HSA or HRA gives you greater flexibility and discretion over how you use your health care dollars, because the funds can be used to cover qualified medical expenses that are not covered by your health plan.

  • HDHPs may have a higher annual deductible than traditional health plans. For 2021, an HDHP in the FEHB Program has a minimum annual deductible of $1,400 for Self Only coverage and $2,800 for Self Plus One/Self and Family coverage (the deductible amount is indexed every year).

    HDHPs in the FEHB Program have annual out-of-pocket limits which do not exceed $7,000for Self Only coverage and $14,000 for Self Plus One/Self and Family coverage.

    Service delivery in the HDHP program within the FEHB Program may be offered with a: Preferred Provider Organization (PPO), Health Maintenance Organization (HMO), or Point of Service (POS) plan. The health plan determines eligibility for a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA).

    Depending on the HDHP you elect, you may have the choice of using either in-network and or out-of-network providers. Using in-network providers will save you money. With the exception of preventive care, the annual deductible must be met before the plan benefits are paid. In-network preventive care services are provided at no cost.

    • If your medical expenses are generally low, you should definitely consider an HDHP.
    • If you would benefit from reducing your taxable income by contributing to your HSA, you should consider an HDHP.
    • If you would like to save for medical expenses in the future or qualified medical expenses not covered by the health plan (Lasix, orthodontia), you should consider an HDHP.
    • If your in-network medical expenses would trigger the catastrophic limit, you may also want to consider an HDHP, if the nature of those expenses is such that you continue to pay out-of-pocket costs in your traditional plan even after you hit your traditional plan's lower catastrophic limit. This can happen because traditional plans may exclude drug and other costs from their catastrophic limits but an HDHP cannot. With an HDHP, once you hit the catastrophic limit, there is no out-of-pocket expense for covered in-network services.

    There are a number of steps FEHB members should take to assist them in making an informed decision as to whether or not an HDHP/HSA or HRA is the right health program option for them.

    • Determine the premium you would pay out of your pay check.
    • Review the drug and other costs not applied to catastrophic limits under a traditional plan.
    • Review the plan design elements: deductible, out-of-pocket limits, the amount the plan contributes to your HSA, known as the "premium pass through," or the amount the plan credits to your HRA.
    • Subtract the annual plan contributions from the annual plan deductible to determine your true out-of-pocket cost (also known as your “net deductible”).
    • Review the eligibility considerations for an HSA. If you are not eligible for an HSA would you accept an HRA?
    • Ask yourself if you are in a financial position to be able to pay the annual net  deductible amount required (depending on Self Only deductible or Self and Family deductible) should you or a family member require a high medical cost service in the early months of the plan year,
    • Determine if you would benefit from making additional tax-deductible voluntary contributions reducing your overall taxable income.
    • If you are between the ages of 55 and 65, determine whether or not your financial situation will allow you to make "catch up contributions".  Currently, catch up contributions are allowed up to $1,000 over the IRS maximum contribution limit.
    • Review the listing of the new health care plans available where you live or work, at OPM Tool to Compare Plans by ZIP Code.
  • The premiums are similar to the premiums for many plans' lowest option but the plan contributes some money from the premium, the "premium pass through," to your HSA. For exact premium amounts you must contact the individual plans offering the HDHP option. Review OPM Tool to Compare Plans by ZIP Code to learn more about new health care plans available.

  • When you are enrolled in an HDHP, you will not have to pay more than the plan's annual catastrophic limit of no more than $7,000 for in-network Self Only coverage and $14,000 for in-network Self Plus One/Self and Family coverage, including the deductible.

    It is important to remember once the catastrophic limit is met, you will not incur additional out-of-pocket covered medical expenses, including doctor visit co-payments and prescriptions which may be excluded from a traditional plan's catastrophic limit.

  • No, several HDHPs are offered through the FEHB Program.

  • GEHA and Mail Handlers are nation-wide indemnity type plans will offering an HDHP with both in-network and out-of-network benefits.
  • Your out-of-pocket expenses for covered medical services are limited to the catastrophic in-network limit of $7,000 for Self Only coverage and $14,000 for Self Plus One/Self and Family coverage. It is important to remember once the catastrophic limit is met, you will not incur additional out-of-pocket covered medical expenses, including doctor visit co-payments and prescriptions which may be excluded from traditional plans catastrophic limit.

HDHP: Obtaining Information

Health Savings Accounts (HSA): The Basics

  • A Health Savings Account allows individuals to pay for current health expenses and save for future qualified medical expenses on a pre-­tax basis. Funds deposited into an HSA are not taxed, the balance in the HSA grows tax free, and that amount is available on a tax free basis to pay medical costs. Your voluntary contributions to your HSA reduce your taxable income. When you enroll in an HDHP, the health plan determines whether you are eligible for a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) based on the information you provide.

    • Your own HSA voluntary contributions are tax-deductible. Your own HSA contributions are either tax-deductible or pre-tax (if made by payroll deduction). See IRS Publication 969.
    • Interest earned on your account is tax-free
    • Tax-free withdrawals may be made for qualified medical expenses
    • Unused funds and interest are carried over, without limit, from year to year
    • You own the HSA and it is yours to keep - even when you change plans or retire
    • Your HSA is administered by a trustee/custodian
  • An HSA plan may save you money through lower premiums, tax savings, and money deposited in your account which can be used to pay your deductible and other out-of-pocket medical expenses in the current year or in the future.
  • Generally qualified medical expenses will be determined by the plan in conformance with FEHB law and Section 213. See IRS Publication 502 for a list of qualified medical expenses. Please note some insurance premiums cannot be paid for by HSA funds.
  • The IRS defines qualified medical expenses. See IRS Publication 502 for a list of eligible expenses. However, not all insurance premiums are qualified medical expenses even though they are stated in the IRS Publication 502.
  • Yes. Your HSA funds are invested. Depending on which HSA plan you are enrolled in, the interest rate and payment of interest will vary.  Most HSA Trustees have higher earning investment opportunities once a threshold balance is accumulated. Your earnings are tax free.

  • Yes. Your funds will accumulate without a maximum cap. However, the annual limit you can contribute to the HSA may not exceed the maximum contribution amount set by the IRS , plus "catch up" contributions for those ages 55 to 65.

  • You own your account, so you keep your HSA, even if you change health plans or leave Federal Government. However, if your HSA was fully funded and you leave the HDHP during the year, then you will have to withdraw some of the contribution from the account. You must pay income tax on your excess contributions and income tax on any earnings of the excess contribution. There is no 20% penalty on excess contributions.

    If you no longer are enrolled in an HDHP you are not eligible to make contributions to your HSA, but you may request withdrawals for qualified medical expenses.

  • Yes, there are administrative fees which vary by plan.  Most health plans pay for the monthly administrative charges for members, but other fees associated with banking may apply (e.g., cost of checks, transfers, overdraft fees).

  • First, you must elect a high deductible health plan. Generally, once the plan receives your enrollment, the plan will mail you an information packet which includes forms for you to complete and return to the plan. When the plan receives the completed forms, the plan will notify its administrator of the HSA. The HSA administrator will then set up your account and your health plan will deposit "premium pass through" payments into the account.

  • All plans offering an HDHP are required to have a financial trustee who can administer the HSA. However, you may choose to keep the funds with the health plan’s trustee or move to the financial institution of your choice.  The health plan does not pay for the monthly administrative fees or other fees when you use a different HSA trustee than your health plan has established.

  • Yes. A Federally chartered credit union qualifies under Treasury Regulations as a trustee/custodian. However, you will need to check with your specific credit union. If your credit union functions as an HSA trustee/custodian, you can work with them in two ways:
    1) Submit your additional voluntary contributions, and 2) transfer funds from the trustee/custodian selected by your plan to the credit union.

  • You can invest the money in your HSA in bank accounts, annuities, certificates of deposits, stocks, bonds, mutual funds, certain types of Bullion or Coins (please see section 408(m)(3) of the IRS Code). However, your HSA custodian or trustee may offer only some of these types of investments.

  • The money market account portion of your HSA is normally insured by a Federal institution (e.g., FDIC, NCUA, etc.) Other types of investments, for instance, stocks, bonds and mutual funds, are subject to normal investment risk.
  • Your HSA would pass to your surviving spouse or named beneficiary tax free. If you are unmarried and do not have a named beneficiary, the money is disbursed to your estate and is subject to any applicable taxes.

HSA: Contributions

HSA: Coverage

HSA: Eligibility

HSA: Withdrawal

HSA: IRS Tax Questions

Health Reimbursement Arrangements (HRA): The Basics

  • An HRA is an employer-funded tax-sheltered fund to reimburse allowable medical expenses. HDHP members who do not qualify for an HSA, will be provided an HRA. There is no additional paperwork needed for enrollment into the HRA.

    1. Tax-free withdrawals for qualified medical expenses 
    2. Carryover of unused credits from year to year as long as you remain enrolled in the same health plan
    3. Credits in an HRA do not earn interest 
    4. Credits in an HRA are forfeited if you leave Federal employment or switch health insurance plans 
    5. Your HRA may be administered by the health plan.
  • First, you must enroll in a High Deductible Health Plan. Depending on which HDHP you choose, the HDHP may send you an enrollment questionnaire. You must complete the questionnaire and return in to the plan. The plan will then set up the fund and contribute your deposits for each month you are enrolled. In most cases, plans credit the full annual amount at the beginning of the year.

  • An HRA may save you money through both lower premiums and tax-free medical reimbursements.
  • If you retire and remain in your health plan, you may continue to use and accumulate credits in your HRA. If you terminate employment or change health plans, only eligible expenses incurred while covered under that health plan will be eligible for reimbursement, subject to timely filing requirements. Unused credits are forfeited.
  • Yes. Your credits accumulate without a maximum cap as long as you remain enrolled in the same health plan.
  • Technically, this isn't money in an account, but a health reimbursement arrangement you use to reimburse qualified medical expenses for yourself and your enrolled dependents.

  • Generally, there are no set-up or administrative fees but you need to check with your individual plan for detailed information on possible costs.
  • You may apply for reimbursement from your HRA for any qualified medical expenses incurred during the period of time you were enrolled in the HDHP and HRA. Your requests for reimbursement are subject to timely filing requirements. Any remaining funds will be forfeited. Please note if the plan credited the entire HRA funds at the beginning of the year, you will be responsible for returning the overpayment for the number of months remaining in the plan year.

HRA: Contributions

Limited Expense Health Care Flexible Spending Accounts (LEX HCFSA)

HRA: Coverage

HRA: Eligibility

  • You are eligible for an HRA if you are enrolled in an HDHP and:
    • You are enrolled in Medicare,
    • You are covered by another non-HDHP health plan, or
    • You are not otherwise eligible for an HSA.

HRA: Withdrawal

HRA: IRS Tax Questions

Questions relating to HDHPs, HSA, HRA and Health Care Flexible Spending Account (HCFSA)

Questions Relating to Retirees and Military Veterans

Retiree and Early Retiree

Military Veteran

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