On-site Clinics, HSA Eligibility, and IRS Guidance

Due to the potential tax savings to an individual who uses an HSA (Health Savings Account), federal law imposes strict eligibility requirements for HSA eligibility/contributions. To establish an HSA and make contributions, the employee must be considered eligible. To be HSA-eligible, an employee must:

1. Be covered by an HSA-eligible High Deductible Health Plan (HDHP) plan;
2. Not be covered by any health plan that provides coverage below the minimum required HDHP deductibles;
3. Not be enrolled in Medicare; and
4. Not be eligible to be claimed as a dependent on another persons’ tax return.

According to IRS Notice 2008-59, the IRS addressed how an on-site clinic may impact employees’ HSA eligibility. In a nutshell, if an employer’s on-site health clinic provides significant medical benefits to employees for free or at a reduced cost this may disqualify them from being HSA eligible.

School, city, and county employers who want to preserve their employees’ HSA eligibility and offer on-site clinic services would be wise to design the plans to be compatible. Some ways to do this may include:

• Limit the health services provided to employees to include first aid, care for workplace illness or injuries, preventative care, or other types of permitted coverage.
• Provide clinic access only to employees who have satisfied their HDHP deductiblefor the year.
• Require employees to pay the fair market value for the medical services received at the clinic and apply those costs towards their HDHP deductible.

Download this bulletin to learn more about  on-site clinic and HSA compatibility or contact your NIS Benefits Consultant.