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. In its simplest form, the employer provides a fixed sum for the employee to buy insurance on his or her own. Under another scheme, the employer provides a voucher for a fixed sum per year for health coverage and allows the employee to choose from an array of less to more expensive plans. Hybrid 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. Another type of plan provides a fixed sum for routine care and a high-deductible insurance plan to cover major illnesses. Currently, health savings accounts (HSAs), health reimbursement arrangements (HRAs), and medical savings accounts (MSAs) are the three types of tax-favored consumer-directed plans that have legal authorization. While HSAs and MSAs require coverage under a high-deductible health plan (HDHP), HRAs are also frequently coupled with an HDHP.
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 ...