Health Savings Account Limits Rise

      As summer begins, many employers are already starting to think about benefit changes for 2009.  Employers that offer, or that are considering offering, high deductible health plans need to be aware of recent changes announced by the U.S. Treasury Department as they design their 2009 health plan offerings. 

      The U.S. Treasury Department recently announced annual increases that affect high deductible health plans (HDHP) and health savings accounts (HSA).  Employers sponsoring HSA-eligible high deductible health plans will need to raise the HDHP's deductible to at least $1,150 for self-only coverage and $2,300 for family coverage to maintain the HDHP's HSA-eligible status.  These minimum deductibles were $1,100 and $2,200 for 2008.  In addition, the maximum out-of-pocket expense that can be incurred by a participant in an HDHP increased to $5,800 for self-only coverage and $11,600 for family coverage.

      The maximum contribution an individual may make to an HSA rose, too.  The maximum annual contribution that can be made to a health savings account in 2009 is $3,000 for individuals with self-only health coverage and $5,950 for individuals with family health coverage.  The limits for 2008 were $2,900 and $5,800 respectively.  Individuals who are age 55 or older may contribute an additional $1,000 in 2009 (increased from $900 in 2008). 

      As health care costs continue to rise, many employers have turned to HDHPs and HSAs to lower spending on employee health costs.  HDHPs require employees to pay a larger amount toward health care costs through a higher deductible with the goal of encouraging employees to become more responsible consumers of health care.  Deductible costs can be paid with funds contributed to an HSA.  Funds contributed to an HSA may be contributed on a tax-free basis (by either an employer, the employee, or both) and are not taxed if they are withdrawn to pay for medical expenses.  In general, an individual is eligible to make contributions to an HSA for each month that the individual is enrolled in an HDHP and is not covered under any other non-HDHP health coverage.

      It's not too early to start planning for 2009 health plan changes and the open enrollment communications that go with those changes.  The Treasury's announcement about HDHP and HSA modifications will need to be a part of those considerations for employers that offer these plans or that are thinking of offering them.  The Treasury's announcement was made in Revenue Procedure 2008-29, which can be found by clicking here.

      For more information about HDHPs and HSAs, or to discuss your current and future health plan design questions, please contact Christopher S. Sears or Melissa Proffitt Reese or the Ice Miller LLP Employee Benefits attorney with whom you work.