High-deductible health plan and Health Savings Account (HSA) enrollment reached 21 million members in 2017 and is expected to continue to climb.1 The once-secret, triple-tax savings accounts are now in the spotlight as the perfect partner to what’s become one of the most widely-offered health plans. But, because the Internal Revenue Code (IRC) sets specific eligibility requirements for HSA participation, they may not be for everyone.
Let’s look at the criteria an individual must meet before enrollment happens.
1. Enrolled in an HDHP
To participate, individuals must first be enrolled in a qualified High Deductible Health Plan (HDHP) on the first day of the month. The individual may either be enrolled through their employer or spouse’s plan.
2. No secondary, non-HSA compatible coverage
If an individual is covered by a qualified HDHP but also has secondary coverage through a spouse’s health plan that doesn’t meet the minimum requirements for an HDHP, the individual would not be eligible to establish a new HSA or make contributions to a current HSA.
3. Not claimed as a dependent on another’s tax return
If an individual is claimed on another’s tax return (like a parent), the individual can’t establish his or her own HSA. However, the individual may still be able to use the HSA funds (if applicable) of the parent or guardian claiming the individual.
4. Not participating in a general-purpose Healthcare FSA or HRA
If an individual or a spouse participates in a Healthcare Flexible Spending Account (HCFSA) or a Health Reimbursement Arrangement (HRA) that allows for reimbursement of all eligible medical expenses, the individual isn’t eligible to make contributions to a current HSA or establish a new one.
5. Not using VA or Indian Health Service medical benefits
If an individual has utilized Veteran Administration (VA) or Indian Health Service medical benefits, the individual must wait three months from the time of use of those benefits to make contributions to an HSA. This does not include the use of VA or Indian Health Service benefits for preventative care, dental, vision, well-baby visits, and immunizations.
6. Not enrolled in Medicare or TRICARE
Once an individual is enrolled in Medicare or TRICARE, the individual is no longer eligible to make contributions to an HSA. However, the individual may continue using his or her existing HSA funds.
For Eligible Employees, HSAs Are Attractive
According to Kaiser’s 2018 Employer Health Benefits Annual Survey, an individual with a single HDHP saves, on average, $58 per month on premiums compared to an individual with a single PPO plan. Additionally, the survey suggests that a family HDHP would save, on average, $144 per month on premiums compared to a family PPO plan.2
The tax savings pave an alluring path; that’s confirmed by the fact that over 1 in 4 eligible employees are enrolled in a high-deductible plan with a savings option.3 But, because HSAs are different from HCFSAs and because they are subject to IRC regulations, there’s important education that shouldn’t be overlooked.
If you want to learn more about HSAs and how to help your employees make the best decisions for their families, contact your local account manager for additional education opportunities.
HSAs can be confusing, but we’re here to help. Learn more, here:
1HealthPayer Intelligence: April 16, 2018 https://healthpayerintelligence.com/news/high-deductible-health-plan-hsa-enrollment-reached-21m-in-2017[JR5]
2 Kaiser Family Foundation: 2018 Employer Health Benefits Survey; October 3, 2018 https://www.kff.org/report-section/2018-employer-health-benefits-survey-section-1-cost-of-health-insurance/[JR6]