Question of the Week
High Deductible Plans That Don’t Qualify For An HSA
Happy Friday all!
With the election (somewhat) behind us, it’s time to get back to the other pressing issues of our lives. And for a lot of you, that’s open enrollment.
Healthcare.gov officially opened on November 1st and will stay open until December 15th. The most common mistake I’ve seen people make is signing up for a high-deductible plan that still doesn’t qualify for a health savings account (HSA). Because HSAs are the only savings vehicles that offer triple tax savings that could offset some high medical costs, it’s important to make sure you sign up for the right type of plan. Let’s get into how to do that.
How do I qualify again?
There are four criteria to qualify for an HSA. The first of which is that you have to be covered under a High Deductible Health Plan (HDHP). While that definition seems self-explanatory (a plan with a high deductible, right?), the IRS adds a couple more caveats:
- Having a deductible of at least $1,400 for an individual or $2,800 for a family.
- The total out-of-pocket expense (including deductibles, copayments and coinsurance) can’t be more than $7,000 for an individual for an individual or $14,000 for a family.
- Except for preventative care, the plan not provide benefits for any year until the deductible for that year is met (this was expanded in 2019).
So if your plan has a high-deductible – what you must pay before insurance kicks in -but doesn’t any of the other two, it doesn’t count as a HDHP. A client found this out the hard way when his plan had a deductible of $2,600 and an out-of-pocket max of $7,600. As such, his plan is not an HDHP for HSA purposes.
Wait, what?
Yes, even though my client had a deductible higher than the HDHP limit, he didn’t qualify for an HSA because he’s required to cover more of his medical expenses. So not only does he have to pay more, he doesn’t get the additional help an HSA provides. That seems completely backwards and counter intuitive to me. It’s like telling a person who is overweight that he can’t go to a gym until he loses several pounds.
It turns out this is a common issue for people who get their health care on the exchange. Some 78% of plans with a high-deductible still don’t qualify as a HDHP because of the other two criteria.
So what can I do?
You can save hundreds and even thousands of dollars by having an HSA, which makes not qualifying a big deal. What can you do? You need to be extra diligent that your plan qualifies for an HSA.
According to HealthCare.gov, HSA-eligible HDHP are identified on plan cards by an “HSA-eligible” flag in the upper left-hand corner. You can also filter to see only HSA-eligible plans by using the filter option in the right-hand corner and selecting the “HSA Eligible Plans” filter.
Also don’t forget that the exchange isn’t the only place you can get insurance if you’re self-employed. Many unions and professional organizations offer insurance. You can also go directly to private insurances to check out their policies. There are also Health Cost Sharing like Liberty Healthshare, CHM, kNew Health to cover those who want affordable, no-frills healthcare
Quote of the Week
“If you don’t like something, change it. If you can’t change it, change your attitude.” – Maya Angelou
Task of the Week
Find out if your plan is HSA eligible! You can verify with your insurer whether you qualify. For health care exchange plans, check for the “HSA eligible” tag. And while you have time until December 15th, it’s best not to wait until the last minute.