High Deductible Health Plan & Health Savings Account (HSA) FAQs

Employees whose insurance follows either the Manager's Plan or the Commissioner's Plan are eligible to enroll in the HDHP. The authorizing language is found in Minnesota Statute 43A.23 subdivision 1 (d):

Beginning January 1, 2010, the health insurance benefit plans offered in the Commissioner's Plan under section 43A.18, subdivision 2, and the Managerial Plan under section 43A.18, subdivision 3, include an option for a health plan that is compatible with the definition of a high-deductible health plan in section 223 of the United States Internal Revenue Code.

Anyone enrolled in the Minnesota Advantage High Deductible Health Plan is eligible for the state-sponsored HSA.

A person generally qualifies as a dependent for HSA purposes if they can be claimed as an exemption on the employee's federal tax return.

An HSA is a special tax-preferred trust or custodial account established under IRS Code Section 223 that is used to pay for current and future medical expenses. The state-sponsored HSA works hand in hand with its High Deductible Health Plan (HDHP). An HSA works like an Individual Retirement Account (IRA), except that the money is used to pay health care costs. The money deposited into the HSA and earnings thereon are not taxable. The funds can be withdrawn from the account to cover qualified medical expenses tax-free. Unused balances roll over from year to year.

The money withdrawn is taxable and may be subject to a 20% penalty if you are under the age of 65.

Anyone may contribute to the HSA of an eligible individual. For example, if an employee establishes an HSA, either the employee or the employer can make contributions. Family members may also make contributions to the HSA on behalf of the family member the HSA belongs to as long as that family member is also an eligible individual. Questions about eligible contributions? Consult your tax advisor.

The annual HSA contribution from you and your employer combined must not exceed the IRS limits of:  

IRS limits may change on an annual basis to keep up with inflation.

The state will make monthly contributions to the HSA of up to:

• $500 per year for full-time employees with HDHP single coverage
  
• $1,000 per year for full-time employees with HDHP family coverage

State employees may also contribute to the HSA on a pre-tax, payroll-deducted basis. However, payroll-deducted contributions may only be directed to the financial institution designated by the health plan you have chosen to administer your HDHP.

Employees on the state's central payroll system will be able to contribute on a pre-tax basis through payroll. You may also make post-tax contributions by writing a check for deposit to your HSA. Check with the financial institution where your HSA is set up for details on how to contribute to that HSA on a post-tax basis.

Your HSA belongs to you and as such, you're responsible for maintaining the account. Here's what's expected of you as an HSA account holder:

• Ensure that you have an HSA-compliant high deductible health plan.
• Ensure that the total HSA contributions (including both the employer and personal amounts) do not exceed the annual maximum.
• Ensure that withdrawals for non-qualified expenses are added back to gross income.
• Keep any records that support withdrawals from your account.
• Complete the required tax form (Form 8889) and attach it to Form 1040.
• Ensure that you do not have any medical coverage that will disqualify HSA contributions from being tax free, including participation in a spouse's medical or pre-tax medical flexible spending account (such as the State’s general purpose MDEA) or Medicare. Remember that if you receive monthly social security payments, you are enrolled in Medicare Part A.
• Ensure that you cannot be claimed as a tax dependent of someone else.

Contributions made to an HSA through medical coverage outside SEGIP stay with you after you leave your job. Talk to the bank that holds your HSA to learn about your options and fees. You can still use the money for medical costs that qualify.

If you choose the Minnesota Advantage High Deductible Health Plan, you will get a new HSA.

You can move funds from your current HSA to your new HSA. Talk to your current bank to learn how to do this.

If you choose the Minnesota Advantage Health Plan, you cannot put money into an HSA or get tax-free money added to it.

To be eligible for tax free contributions toward an HSA, an individual generally cannot have health coverage other than HDHP coverage. This means that an HSA-eligible individual cannot be covered by any health plan that provides coverage below the minimum HDHP deductible, including Medicare. For example, if your spouse has family coverage that would provide for coverage of benefits within the HDHP deductible, you would not be permitted to have an HSA. (Remember that if you receive monthly social security payments, you are enrolled in Medicare Part A.)

Any expenses that could be paid from an MDEA or HRA can be paid from your HSA. To avoid any adverse tax consequences should you wish to enroll in an MDEA, you must enroll in a limited purpose MDEA from which you may pay only vision and dental expenses, and expenses incurred after you have met the HDHP's annual deductible. The same holds true of your HRA which must become a limited purpose HRA. The State's pre-tax plan administrator, BRI, currently administers such accounts.

Yes. If both an individual and spouse have family HDHPs, the maximum annual HSA contribution (combining both personal and employer contributions) for the family in 2026 is $8,750. This is true if there is just one HSA or if each spouse has their own HSA. A family cannot increase its annual contribution because there are two HDHPs and/or two HSAs. This limit is split equally unless the individual and spouse agree on a different division. For other tax situations, consult your tax advisor.

A married couple may not have a joint HSA. Each spouse who wants to contribute to an HSA must open a separate HSA, and dollars cannot be transferred between them. However, one spouse may use withdrawals from their HSA to pay or reimburse the qualified medical expenses of the other spouse, without penalty. However, both HSAs may not reimburse the same expenses.

The schedule of benefits is based on the Minnesota Advantage Health Plan with its primary care clinics being put into four cost levels, depending on their total cost of care of providing medical services. The network of providers for the HDHP is the same as for the low-deductible Minnesota Advantage Health Plan. 

Under the HDHP, all services, including prescription drug purchases but not including preventive care, are subject to the annual first dollar deductible for single and family ranging from $1,750 to $4,250 for single coverage and $4,000 to $8,500 for family coverage. Once the first dollar deductible has been met, individuals are responsible for copayment and coinsurance up to the annual out-of-pocket maximums of $3,250 to $5,250 for single coverage or $6,500 to $10,500 for family coverage based upon the cost level of the primary care clinic chosen. 

Please review the Advantage High Deductible Health Plan (HDHP) Design and Summary of Benefits for detailed information. 

The HDHP is administered by the same plans that currently administer the low-deductible Advantage Health Plan: Blue Cross and Blue Shield of Minnesota and HealthPartners.

The plan's monthly premiums will be $937.36/ $2,795.66 (single/family) for 2026. The employer will contribute to the premium on the same basis as it contributes to the low-deductible Advantage Health Plan premiums (i.e., 95% of single premium, 85% for dependent premium). Thus, a full-time employee with single coverage will pay $48.94 monthly during the 2026 plan year, and those with family coverage will pay $333.92 monthly.

Emergency care or urgent care at a hospital emergency room or urgent care center out of the plan's service area or out-of-network is covered on the same basis as in-network coverage. 

Other care received out of the service area may also be covered as long as the member goes to a provider within their plan administrator's national network. These members pay a $1,750 single or $4,000 family deductible and 30% coinsurance up to the $4,250 / $8,500 out-of-pocket maximums. The deductibles are separate and distinct from the members in-service area deductible.

The deductible under the HDHP program is referred to as a non-embedded deductible. For employees with family coverage, this means that the annual deductible must be collectively satisfied by one or more of the individuals covered under the family plan before the Health Plan begins paying any medical or prescription drug benefits. The annual deductible includes both medical and pharmacy. The annual deductible for single coverage ranges from $1,750 to $4,250 based upon the cost level of your primary care clinic. The annual deductible per family member for family coverage ranges from $3,500 to $6,750 with the range of $4,000 to $8,500 per family and is based upon the cost level of your selected primary care clinic. 

Similarly, the out-of-pocket maximum needs to be met collectively before the plan pays 100%. The annual out-of-pocket maximum ranges from $3,250 to $5,250 for individual coverage depending on the cost level of the primary care clinic you have selected and ranges from $6,500 to $10,500 for family coverage depending on the primary care clinic you have selected. 

This differs from the low-deductible Advantage Health Plan, which has an embedded deductible, i.e., when out-of-pocket expenses for one family member reach the individual deductible amount, that family member has satisfied their individual deductible, and the health plan starts to pay for that individual. The remainder of the family deductible amount can be satisfied by any one or more of covered family members individually or collectively.

The State as the employer will pay HSA fees for as long as you participate in the Advantage High Deductible Health Plan.

For an established HSA, contributions for the taxable year can be made in one or more payments at any time after the year has begun and prior to the individual’s deadline (without extensions) for filing the eligible individual’s federal income tax return for that year. 

For most taxpayers, this is April 15 of the year following the year for which contributions are made.

Once your account is initially funded, you can take distributions from funds available in the account any time for qualified medical expenses.

As the HSA accountholder, you must ensure that distributions are used for qualified medical expenses only. Records of medical expenses should be maintained as evidence that distributions have been made for these purposes. You are responsible for ensuring contributions to the HSA do not exceed the IRS maximum limits.

A debit card will be provided, and you will also be able to manually request withdrawals. Check with the financial institution where you have your HSA for other options.

IRS form 8889 must be completed with your tax return each year to report total deposits and withdrawals from your account. You do not have to itemize deposits and withdrawals to complete this IRS form.

The assets in an account, regardless of the source of contributions, always belong to you as the account holder. Any remaining balance will carry over to the next year. There is no "use it or lose it" requirement.

• Blue Cross and Blue Shield of Minnesota HSAs are with HealthEquity
  
• HealthPartners HSAs are with Optum

You may continue participation in the HDHP through COBRA continuation; however, State contributions to your HSA will cease unless you are continuing to receive a contribution to your health insurance premium during layoff or retirement. The HSA continues to be your account and you may pay eligible medical expenses through it. You will be responsible for the monthly admin fees if you are no longer working for the State.

Because you are the HSA account owner, you may continue to maintain the account.

As an account holder, you may designate a beneficiary when you open your HSA and you may change your beneficiary designation in writing at any time.

• If a spouse is the designated beneficiary of an HSA, the account will be treated as the spouse's HSA after the death.
• If the spouse is not the designated beneficiary of the HSA on the date of death: (1) the account stops being an HSA, and (2) the fair market value of the HSA becomes taxable to the designated beneficiary.
• If there is no designated beneficiary, the fair market value of the account will be included in the account holder's final income tax return and estate tax return.

There are many financial advantages to owning an HSA, including:

• Employer contributions, including employee cafeteria plan contributions, are excluded from taxable income.
• Post-tax contributions are tax deductible, even if you do not itemize deductions on Form 1040.
• You may make tax-free withdrawals from your account for qualified medical expenses not covered by the HDHP.
• The interest or other earnings on the assets in the HSA accumulate tax-free.
• If, in the future, you are not covered by HDHP, you may still make tax-free withdrawals from your account for qualified medical expenses (but you may not contribute additional amounts to the HSA).
• If you become disabled or reach age 65, withdrawals can be made for non-medical reasons without penalty, but amounts must be reported as taxable income.

An HSA can be used to pay for qualified medical, vision, dental or certain over the counter and prescription drug expenses as defined by the IRS.

Qualified medical expenses are expenses paid by the account holder for diagnosis, cure, mitigation, treatment or prevention of disease. Examples of these expenses are those that fall under the deductible of the health plan, certain over the counter and prescription drugs, transportation to care providers, qualified long‐term care expenses, and certain health insurance premiums. Expenses are "qualified medical expenses" only if they are not covered by insurance or any other type of coverage.

Qualified premiums include:

• COBRA
• Health insurance after you reach age 65 (other than Medicare supplement policies)
• Qualified long-term care insurance
• Health insurance premiums while receiving unemployment compensation

You can make and receive contributions if you are not enrolled in Medicare (either Part A and/or Part B). Once you are enrolled in Medicare, you can no longer contribute to your HSA. You lose eligibility as of the first day of the month you become enrolled in Medicare. If you enroll for Medicare A using special enrollment because you are over the age of 65, Medicare Part A may be retroactive for up to six months when you do apply (assuming you were eligible during those six months). Therefore, if you think you may be eligible for Medicare Part A benefits retroactively, you should discontinue HSA contributions before the retroactive date on which the entitlement to Medicare begins. Even though you may not be able to contribute to an HSA when you are enrolled in Medicare, you may continue to use the funds in the HSA account.