14. Who is eligible for a Health Savings Account?

Here is the U.S. Department of Treasury's answer, which can be found at: http://www.treas.gov/offices/public-affairs/hsa/faq2.html#hsa3
To be eligible for a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP), must not be covered by other health insurance (does not apply to specific injury insurance and accident, disability, dental care, vision care, long-term care), is not eligible for Medicare, and can’t be claimed as a dependent on someone else’s tax return.

15. What Is a High Deductible Health Plan (HDHP)?

A HDHP is a health insurance plan with minimum deductible of $1,000 (self-only coverage) or $2,000 (family coverage). The annual out-of-pocket (including deductibles and co-pays) cannot exceed $5,000 (self-only coverage) or $10,000 (family coverage). HDHPs can have first dollar coverage (no deductible) for preventive care and higher out-of-pocket (co pays & coinsurance) for non-network services. To find out if your health insurance plan is HSA qualified, please go to question number 5.

16. Did I have to set up the HSA by the end of 2003 (like an IRA) or can I do it now to still get the tax saving benefits for last year?

HSAs did not exist last year. The law authorizing them was signed by President Bush in early December (and was part of the Medicare Rx bill) and the HSA section became effective on 1/1/04. You would have to have had a Medical Savings Account last year to get a tax benefit for 2003.

17. I understand co pay plans are not eligible. Do prescription drug co pay riders fall under that rule?

The U.S. Department of the Treasury has recently stated that those with a health insurance plan that is in all other respects HSA compatible, except that it provides prescription drug coverage below the deductible, then until 1/1/2006, such persons can have an HSA. This is how the U.S. Department of Treasury’s media release described this recent Treasury ruling: http://www.hsainsider.com/treasury/treasury_7.pdf

INTERACTION OF HDHP BENEFITS WITH PRESCRIPTION BENEFITS AND
TRANSITIONAL RELIEF Prior guidance noted that an eligible individual must be covered by an HDHP and generally no other health plan that is not an HDHP. Guidance issued today clarifies that individuals covered by a health plan that provides prescription drug benefits before the minimum annual deductible of an HDHP has been satisfied may not make contributions to an HSA. However, companion guidance also issued provides transition relief to those individuals covered by both an HDHP and by a separate health plan or rider that provides prescription drug benefits before the deductible of the HDHP is satisfied. Under the relief, such individuals continue to be eligible to contribute to HSAs before 2006. If you want to read the full text of the Ruling, go to: http://www.hsainsider.com/treasury/treasury_3.pdf