One form of health plan design that has become very popular is consumer-driven health care, including defined-contribution health plans intended to make employees more conscious and responsible for the cost of their health care. Typically, defined-contribution plans combine a high-deductible plan with a tax-exempt medical expense savings account that could cover the deductible, copayments, or the cost of out-of-network care. Health savings accounts (HSAs) and health reimbursement arrangements (HRAs) are the most common types of tax-favored consumer-directed plans. HSAs must be combined with a high-deductible health plan (HDHP), and HRAs frequently are as well.
An HSA is a tax-exempt trust or custodial account established exclusively to pay qualified medical expenses of the account beneficiary who, for the months for which contributions are made to an HSA, must be covered under an HDHP. Only an “eligible individual” can establish an HSA. In addition, contributions to an individual's HSA may only be made while that person is an “eligible individual.”
“Eligible individual” defined. An “eligible individual” means any person who:
• Is covered under an HDHP;
• Is not covered under any health plan that is not an HDHP (except under certain circumstances);
• Is not enrolled in Medicare; and
• May not be claimed as a dependent on another person's tax return.
An eligible individual cannot be covered by a health plan that is not an HDHP unless that health plan provides only “permitted insurance” or other permitted coverage, including:
• Coverage for liabilities incurred under workers' compensation laws, tort liabilities, and liabilities relating to ownership or use of property;
• Coverage for a specified ...