Consumer-driven Health Plan/Health Savings Account Insurance Options
The consumer-driven health plan includes a health savings account, or HSA. Optum Financial is the HSA vendor.
In 2023, HSA maximum contribution amounts are changing. See 2023 contribution amounts below.
State and higher education employees: The state will increase its funding of the health savings account for enrolled CDHP members to $500 (employee tier) and $1,000 (all other family tiers).
With a CDHP/HSA or Local CDHP/HSA:
· You’ll have lower premiums compared to the preferred provider organizations, but a higher deductible.
· You’ll pay your deductible first before your insurance plan pays anything for most services, and then you’ll pay coinsurance, not copays.
· An HSA can help you save for your health care now and in the future.
· An HSA offers tax benefit. Employee and employer contributions and withdrawals for qualified medical expenses are tax-free.
· You can take the savings from paying a lower premium and put them in your HSA to cover your deductible.
· Your HSA balance carries over each year, and you can take it with you if you leave or retire!
· The IRS sets a limit on how much money you can put in your HSA each year, including employer contributions.
· Your full contribution amount will not be available to you upfront. You may only spend the funds that have been added to your HSA.
How does the CDHP/HSA work?
· You pay for your health care differently. When getting care or a prescription, you pay for those expenses until you reach your deductible. Then you pay coinsurance for your medical and pharmacy costs until you reach your out-of-pocket maximum. You get discounted network rates for all your care, as long as you use network providers.
· For certain 90-day maintenance drugs, such as hypertension or high cholesterol medications, you only pay coinsurance, and you don’t have to meet your deductible first. You must use a Retail-90 network pharmacy or mail order to fill a 90-day supply of your medication to receive this lower-cost benefit. Check with your pharmacist or CVS Caremark if you have questions. Click here to learn more about pharmacy costs with a CDHP. Find a list of Retail-90 pharmacies at info.caremark.com/stateoftn.
· You get an HSA to help you save for your health care costs. You can contribute money through payroll deduction to your HSA (some local education and local government agencies may not offer payroll deduction*). In some cases, your employer may contribute money to your account. You can take the money you save on premiums between the CDHP and PPO and put it into your HSA each month.
· You can use your HSA money to pay for out-of-pocket costs like your deductible and coinsurance for doctor’s visits and prescription drugs.
· Your HSA money rolls over each year. You keep it if you leave or retire.
· When you turn 65, you can use money in your HSA for non-medical expenses. Before age 65 non-medical expenses are both taxed and subject to a 20% penalty. After age 65, non-medical expenses are taxed, but the 20% penalty does not apply.
· You save money on taxes! Your HSA contributions can be pre-tax. You can put money from your paycheck directly into your account by payroll deduction (some local education and local government agencies may not offer payroll deduction*). This lowers your taxable income, saving you money. Any employer contributions are tax free, qualified medical expenses are tax free and the account collects tax-free interest on the balance.
Once your balance reaches $1,100, you have the option to invest a portion of your HSA in a variety of funds to possibly grow your account further. You can continue to invest anytime your HSA deposit account has a balance greater than $1,100. You can also set up an automatic sweep on the Optum website or app each time the $1,100 balance is reached. Note: Investing a portion of your HSA is a personal choice you can make. There is no guarantee that your investments will generate a return. As with any investment, you may lose money.
Retirees: You can contribute to your HSA with after-tax dollars and then claim it on your tax return. This lowers your tax liability. Qualified medical expenses are tax-free and the account collects tax-free interest on the balance.
· After you enroll, Optum Financial will send you a debit card to spend your HSA funds on qualified health care expenses. You can order additional debit cards for your spouse or dependents. You can also pay for your expenses online. Simply log in to your HSA account on the Optum Financial website (instructions provided below).
*Local education and local government employees should check with their agency benefits coordinator to find out if their agency offers payroll deduction for the HSA.
For Enrollees, here's how to create your Optum Financial profile and sign in:
Go to optumbank.com/tennessee and click Sign In.
Create a HealthSafe ID if you have not yet done so. This is Optum’s user ID that works across all of their platforms. Click on “Register here” below the heading, “Not sure if you have a HealthSafe ID?”
Follow the instructions. You may use either the last six digits of your Social Security number or your Edison ID, which are the eight digits on your Caremark pharmacy ID card that start with two zeroes: “00-----".
- Click here for 2023 Health Options — State and Higher Education.
- Click here for 2023 Health Options — Local Education and Local Government.
- The HSA/FSA grid for 2023 shows details about contributions, tax benefits and how you can use your funds.
Optum has a series of four short videos that can help you understand what an HSA is, how to use it and how to invest some of your funds for future medical expenses during your retirement. Once you register and log in at optumbank.com/Tennessee, click on “Help & Tools” at the top, then choose “Optum Bank Academy” and select any of the short HSA courses to learn more. A checkbox will appear in the lower right corner of each course panel once you complete it.
2023 maximum HSA contribution amounts:
- $3,850 for employee/retiree only (including state or employer contributions)
- $7,750 for all other tiers (including state or employer contributions)
- Members 55 or older can save an extra $1,000 each year. It’s called a catch-up contribution.
- HSA contributions in excess of the IRS 2023 maximums listed above are not tax deductible and are subject to a 6% excise tax, so please monitor your HSA contributions carefully.
Important! Your full HSA contribution is not available upfront at the beginning of the year or after you enroll. Your pledged amount is taken out of each paycheck or as you add funds to your HSA. You may only spend the money available in your HSA at the time of service or care. You can pay out of your own pocket and pay yourself back later with funds from your HSA. If you enroll in Social Security at age 65, you will automatically be enrolled in Medicare Part A. If enrolled in a CDHP, this may have tax consequences and affect your HSA contribution. Consult with your tax advisor for advice. Neither the state nor your employer may offer tax advice.
- The state will put money into your HSA at the beginning of the year: $500 for employee-only coverage or $1,000 for family coverage.
- The state does not put money into your HSA if your coverage starts September 2 through December 31.
- Please note: If you have any issue about receiving your state HSA money (seed funds), you must contact your agency benefits coordinator by March 30 of the applicable year, or within 90 days of your benefits effective date. After that, enrollment and seed funds issues are considered settled. Issues will not be researched further unless it is determined an error occurred that impacted your funding.
- You can also contribute through payroll deduction, by writing a check to deposit funds in your HSA or by linking your personal bank account and adding funds. If you do this, you’re using after-tax funds to add to your HSA, and then you can take an above-the-line deduction when you file your return. This lowers your taxable income.
- State employees: You can enter your HSA contribution amount during Annual Enrollment or when you enroll.
- NEW! If you entered an HSA contribution amount into Edison in 2022, that amount will roll over into 2023 unless you change the amount. State employees can also put their wellness program cash incentives into their HSA. State employees can make this choice during annual enrollment. Note: Any wellness incentives deposited into the HSA will count toward the overall HSA IRS annual maximum. This means you need to take the 2023 IRS limit and subtract the $500 or $1,000 seed funds from the state, and subtract how much you think you will earn in wellness program incentives in 2023 to determine how much money you want to contribute to your account pretax
If offered by your employer, you can contribute to your HSA with pre-tax dollars from each paycheck. You can also contribute after-tax funds by check or by linking your bank account to your HSA. You can claim the contributions on your taxes to lower your taxable income.
State and Higher Education CDHP/HSA
No state HSA funds are available. You can contribute after-tax funds by check or by linking your bank account to your HSA. Then, at tax time you can take an above-the-line credit. This will reduce your taxable income up to the annual HSA contribution limit allowed by the IRS. Note that once you enroll in Medicare, IRS rules prevent you from contributing to your HSA. However, the funds you have already saved in your HSA remain yours to spend on IRS-approved health care expenses. For more details, consult your tax advisor.
Local Education and Local Government CDHP/HSA:
You can contribute after-tax funds by check or by linking your bank account to your HSA. Then, at tax time you can take an above-the-line credit. This will reduce your taxable income up to the annual HSA contribution limit allowed by the IRS. Note that once you enroll in Medicare, IRS rules prevent you from contributing to your HSA. However, the funds you have already saved in your HSA remain yours to spend on IRS-approved health care expenses. For further details, consult with your tax advisor.
You cannot enroll in the CDHP or Local CDHP if:
· You are enrolled in another plan, including a PPO, your spouse’s plan or any government plan (such as Medicare A and/or B, Medicaid, TRICARE or Social Security benefits).
· You have received Department of Veterans Affairs benefits within the past three months, except for preventive care. If you are a veteran with a disability rating from the VA, this exclusion does not apply. If you are eligible for VA medical benefits but did not receive benefits during the preceding three months, you can enroll in and make contributions to your HSA. If you receive VA benefits in the future, you are not entitled to contribute to your account for another three months. However, if your veteran’s hospital care or medical service was for a service-connected disability, you may contribute to your HSA.
· You have received care from the Indian Health Services within the past three months.
HSA and FSA restrictions: If you enroll in the CDHP/HSA, you and your spouse cannot have a medical flexible spending account or a health reimbursement account at either employer. Instead, if available, you can enroll in a limited-purpose flexible spending account for dental and vision costs.
CDHP frequently asked questions
The CDHP is a Consumer-driven Health Plan with a health savings account. It uses the same provider networks and discounted rates as the PPOs and covers the same services. It has lower monthly premiums, but a higher deductible.
You control more of your health care dollars. When you get care or need a prescription, you pay for those expenses until you reach your deductible. Then you pay coinsurance for your medical and pharmacy costs until you reach your out-of-pocket maximum. After you reach this maximum, you are covered 100 percent.
You also have a health savings account, a tax-free savings account you can use to pay for your deductible, qualified medical expenses and to save for retirement. You can contribute to your HSA and some employers do, too. For example, you can take the money you save in premiums for the CDHP versus a PPO and put it in your HSA.
For state and higher education employees, if you enroll in the CDHP/HSA, the state puts money into your HSA: $500/individual and $1,000/family. If your coverage begins on or after September 2 through December 31, 2022, the state contribution is not available.
Local government and local education employees should check with your agency benefits coordinator to see if your agency will provide funding for your HSA.
A health savings account is a tax-exempt account individuals can use to pay or save money for qualified medical expenses on a tax-free basis. Our HSA is administered by Optum Financial. The money in the account earns interest and when it reaches $1,000 you can invest it.
The money you save in the HSA (both yours and applicable state or local agency contributions) rolls over each year and collects interest. You don't lose it at the end of the year.
You can use money in the account to pay your deductible, qualified medical, vision and dental expenses and to save for retirement.
The money is yours! You take the HSA with you if you leave or retire.
You will receive two debit cards, one card for you and another card for a dependent to use, or to keep as a spare . You may order additional cards for your spouse and/or dependent(s) to use for medical expenses.
The HSA offers a triple tax advantage on money in your account:
- Both employer and employee contributions are tax-free
- Withdrawals for qualified medical expenses are tax-free
- Interest accrued on HSA balance is tax-free
The HSA can be used to pay for qualified medical expenses that may not be covered by your plan (like vision and dental expenses, hearing aids, contact lenses and more) with a great tax advantage.
Money in the account can be used tax-free for health expenses when you retire. When you turn 65, it can be used for non-medical expenses. Non-medical expenses will, however, be taxed.