UNDERSTANDING HSA SPEAK - DEFINITIONS

“Above the Line” Deduction
In regard to HSAs, this term refers to the fact that if you make HSA contributions directly from your paycheck (before taxes are calculated and paid), it will reduce your total taxable income whether you itemize or use the standard deduction on your income tax form.

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Beneficiary
For your HSA, you may select an individual (or individuals) as your beneficiary to inherit any HSA funds that remain in your account after your death.

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Catch-up Contributions
Catch-up contributions are additional contributions above the annual limits, HSA owners when they reach age 55. As with all contributions, these must stop once an individual becomes eligible for Medicare.

Coinsurance
A common provision of health plan coverage in which the insured shares in the cost of covered services on a percentage basis. Generally, co-insurance is applied after you meet your policy deductible. For example, a plan with 80/20 co-insurance means that after you pay your deductible the insurance company will pay 80% of the remaining covered expenses, up to a set amount and you will pay the other 20%.

Contributions
Deposits to an HSA account.

Co-payment
A fixed dollar amount (e.g., $20) you must pay directly to the medical provider at the time you receive health care services. Typical co-pay services include visits to a physician office or the purchase of prescription drugs.

Covered Expenses
Services for which the health plan makes either a full or partial payment.

Custodian
The insurance company, bank or other financial institution that holds your HSA account funds. In some states, the institution is considered a “trustee” of your account.

Deductible
A fixed dollar amount you are required to pay each year for qualified expenses before your health plan begins paying part or all of additional costs. If the deductible is $1,000, for example, you pay the first $1,000 of qualified health care expenses, then further costs will be covered in part or in full by your health plan.

Distributions
Amounts paid from your HSA for qualified health care services.

Embedded Deductible
The amount any one individual family member has to pay before the policy pays for covered benefits. This amount is generally lower than an “umbrella deductible.” Also known as an “individual deductible.”

Enrollee
An individual who has coverage under a health insurance policy. Also referred to as a member, insured or participant.

Explanation of Benefits (EOB)
An insurance company document that usually reports the medical services you received, the provider’s charges for these services, the negotiated rate at which the benefits were payable under your policy and the amount you owe the provider. It also may show how much you have paid year-to-date towards meeting your deductible and/or out-of-pocket limit.

Family coverage
For HSA purposes, any coverage that is not “self-only” coverage. It includes self + spouse, self + dependent children, and self + spouse + children.

First-dollar Coverage
Applies to specific covered expenses in which your plan provides immediate reimbursement or does not require any payment without your having to meet your deductible. Some preventive services may have first-dollar coverage under your health plan; check your Certificate of Coverage or Plan Summary for more details.

Flexible Spending Account (FSA)
A pre-tax savings account offered through an employer and funded by payroll deductions that employees can use to pay for medical expenses not reimbursed by their health plans. Although FSAs are exempt from federal taxes and from state taxes in most states, you generally cannot roll over your FSA balances to the next year and unused funds revert back to the employer.

Health Reimbursement Account (HRA)
A tax-exempt account—funded and owned exclusively by the employer—that an employee can use to pay general health care expenses before using traditional health care coverage. Unspent funds usually can be carried over to the next year, but cannot be taken with you if you leave the company.

Health Savings Account (HSA)
An HSA is a consumer-managed, tax-favored alternative to traditional health insurance that enables you to save money for current and future medical expenses. To establish an HSA for your tax-deductible contributions, you must be covered by a qualified high deductible health plan. The tax benefits include:

• Tax savings on contributions
• Tax-free earnings on the money kept in the account
• Tax-free distribution of the funds when used for qualified medical expenses

High-Deductible Health Plan (HDHP)
A health plan that meets federal requirements regarding minimum deductibles, maximum out-of-pocket expenses, covered benefits and preventive care. Compared to traditional health plans, an HDHP typically offers lower premiums in exchange for higher annual deductibles. You must be covered under an HDHP to be eligible to open a Health Savings Account. Also known as an HSA-Qualified Plan

Health Maintenance Organization (HMO)
In an HMO, the enrollee uses the doctors, hospitals and clinics that participate in their plan's network. No benefits are paid for non-emergency benefits provided outside the HMO network. In addition, the enrollee selects a primary care physician who coordinates care and makes referrals to any necessary specialists.

In-Network
Care that has been provided by health care professionals and facilities that have an agreement with your insurance carrier to provide services to you at a negotiated fee.

Maximum Annual Contribution
The total amount the government allows you (and your employer) to add to your HSA in a given year. If you are 55 or older, you are eligible to make additional catch up contributions to your HSA above this amount.

Medical Savings Account (MSA)
MSAs are tax-exempt trust or custodial accounts in which account holders can save money for future qualified medical expenses. They have been replaced by HSAs and you can no longer open a new MSA. If you have an MSA, you can keep your account and continue taking tax deductions for additional contributions, or roll your MSA into an HSA.

Out-of-Network
Care provided by health care professionals and facilities that do not have an agreement with your insurance carrier to provide services at a negotiated fee. These providers may charge undiscounted prices that may not be paid by your health insurance company.

Out-of-Pocket Expenses
The costs you pay to providers for health care services, including deductibles, co-pays and coinsurance. This does not include insurance premiums.

Out-of-Pocket Maximum
The maximum amount you must pay in a year under your health plan coverage through coinsurance, deductibles and co-payments. After you reach this maximum, your health plan pays 100 percent of additional covered health care expenses.

Permitted Insurance
Refers to additional policies you may hold and still contribute to your HSA. These can include policies that provide coverage for workers’ compensation, accidents, disability, dental care, vision care, long-term care or specific diseases or illness, such as cancer, diabetes, asthma or congestive heart failure.

Preferred Provider Organization (PPO)
A health care delivery arrangement that offers insured individuals access to participating providers at reduced costs. Traditionally, PPOs encourage enrollees to use providers in their network by offering lower deductibles and co-payments.

Preventive Care
Health care services meant to either prevent a medical condition from occurring or to detect the early stages of a condition, which then can be more effectively treated. Preventive care includes regular medical check-ups, screening tests, vaccinations and programs that encourage healthy lifestyles.

Qualified Medical Expenses
Medical expenses that count towards satisfying your health plan deductible and/or are allowed to be paid tax-free from your HSA, HRA or FSA. The federal government determines which expenses are considered “qualified” and provides a partial list of such services at www.irs.gov.

Tax-Free Contributions
If you participate in a payroll deduction program through your employer, these deductions are excluded from your taxable federal income, Social Security (FICA) and for most states, your state income. By taking deductions pre-tax, you reduce the dollars on which you are taxed, and, as a result, your total tax bill.

Trustee
The insurance company, bank or other financial institution that holds your HSA account funds. In some states, this institution is considered an account “custodian.”

Umbrella Deductible
The total amount of out-of-pocket expenses that a family must meet before a health plan pays for covered benefits. Depending on the terms of the policy, this deductible may be met by one or any combination of family members’ out-of-pocket expenses. Also known as a "family deductible."

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