Health Savings Accounts are not subject to COBRA. An HSA is a tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who, for the months for which contributions are made to an HSA, is covered under a high-deductible health plan.
A Health Savings Account. (HSA) is available to employees group health plan as a high deductible. The employer and the employee can both contribute money to this account. The employee is able to deduct contributions from their taxes or contribute pre-tax dollars from their paycheck. This money can be used out of pocket health care expenses that the group health insurance does not cover. They differ from
HRAs or Health Reimbursement Arrangement that are subject to COBRA.
Creation of HSAs
The Medicare Prescription, Improvement, and Modernization Act of 2003 which became effective on January 1, 2004 created the ability for individuals to purchase a high deductible insurance plan and create a portable health savings account (HSA). The accounts are designed to allow individuals and employers to fund a pre-tax account throughout the year to pay for unreimbursed medical expenses (i.e. deductibles, coinsurance and Section 213(d) expenses not covered under the insurance plan).
HSAs are similar to flexible spending accounts (FSAs) under Cafeteria Plans but with some differences. HSAs may only be implemented along with high deductible health plans. A high deductible health plans is a medical insurance plan with an annual deductible of at least $1,000 for Single coverage and $2,000 for a family, adjusted for inflation. All employees under age 65 are eligible for maintaining a HSA with the exception of individuals who are covered under other coverage that is not a HDHP and offers duplicate benefits.
Using HSAs to pay for COBRA
HSAs may be used to pay COBRA continuation coverage premiums upon termination which softens the large premiums usually associated with COBRA. In addition to COBRA premiums, HSAs may be used to pay premiums for a long-term care plan, individual coverage while receiving unemployment compensation and any health insurance other than Medicare supplemental plans if the person is age 65 or older and meets the Social Security Act’s disability requirements.Written by Craig J. Casey
Craig Casey is an Writer, Coach, Blogger, Husband, and Former Health Insurance Agent helping people on the web since 1999 with their health insurance problems.
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