As a group health agent I have several clients who are very interested in establishing an HSA program, but have employees who are age 65+. How can an employer offer an HSA plan without discriminating against their 65+ age group employees? I have heard employees who are do not have Medicare and are 65+ can still participate.

Since no one is now selling Medicare Savings Accounts, it is impossible to offer something to a 65+ year old which does not exist. Until Medicare Savings Accounts are available, no one 65 or older can have the insurance and the account.

What is the maximum limit a married couple can deposit to one HSA?

The maximum HSA deposit for a family cannot exceed the deductible, or in the case of a deductible higher than $5,150, the HSA deposit cannot exceed $5,150 in 2004.

Where can I find a list that contains the specific items one may pay for through a HSA? e.g. over the counter drugs, orthodontia, lasik eye surgery, flu shots, etc.

An abbreviated list and the link to the IRS Document 502 can be found on this website. In the Menu section go to Medical Expense Guidelines. The list is long, and most things are approved expenses. However, some expenses may not count towards your health insurance deductible; it depends on your health plan.

For a PPO plan (a "network plan"), does it matter if out of network expenditures apply to in network deductible and max out of pocket?

Yes, but keep in mind that out-of-network benefits are typically less than in-network benefits. Therefore, the relative percentage would be calculated and credited towards your maximum out of pocket deductible. However, when paying for qualified expenses through the HSA portion of your plan, incurred expenses can be paid from the first dollar of expense regardless if you are in or out of network. The only time the out of network difference comes in to play is if and when you exceed your annual deductible and start using benefits from the insured medical portion of your plan.

If my client begins depositing money into an HSA account and then incurs a claim that exceeds the amount deposited into the account, I understand there are two remedies. Distribute funds from the account to pay as much of the bill as possible and pay the balance with after tax funds, Or, deposit enough funds to pay- up the balance of the annual contribution for that year (or enough to cover the bill) and then once the deposit is made into the HSA account, pay the entire bill (assuming the max contribution is enough to cover the bill) tax free. Is this correct?

Yes, and here is another option. Some insurers who sell HSAs offer a rider that allows those just starting out with an HSA to access the full amount of a year's contribution to the HSA should they need it. The employee or the individual then pays back the amount to the insurer on a month by month basis. Once the employee's or the individual's HSA balance exceeds their deductible, or once they feel they have enough funds in their account, they can elect to drop the rider.

Each quarter an employer is required to file a 941 tax report. How does he treat the HSA contributions?

An employer would treat the HSA contributions as any other pre-tax business expense. For example, the same way the employer treats the contribution to the health insurance plan.

How are expenses verified to be qualified medical expenses? Are receipts required to be sent to insurance carriers? Are there audits? If I have a debit card linked to HSA funds, where does the burden of proof lay in the event of an audit, with the individual or with the third party debit card provider?

The owner of the HSA account is responsible and accountable to the IRS, in the event of an audit. The insured, once their deductible is reached will provide the expenses to the insurer. The burden of proof lies with the owner of the HSA and not with the entity providing the debit card.

I'm an agent and want to sell HSAs. Even though the insurance carriers in my state haven't formally offered HSA plans, their plans meet the criteria. So it appears that I can sell "HSA" plans as long as the client is willing to set up the HSA savings account on their own (thru a qualified vendor of course). Am I correct?

Also, are there any restrictions on setting up an HSA thru an HMO provider?

Yes, you are correct, if the plan meets the HSA qualified criteria, they can set up a health savings account. As long as the HMO has a qualified health plan, there is no restriction on an HMO selling an HSA qualified plan.

Can I sell my clients a "gap" plan along with the HSA account to cover those first dollar benefits you give up when establishing an HSA?

No, you can not insure the deductible of the qualified high deductible health insurance plan with a “gap” plan. It would defeat the entire purpose of HSAs, which is to create a low cost premium plan to free up cash now going to an insurance company, and instead, put the money in your bank account.