HSA Eligibility and What Makes a Health Plan HSA-Compatible
By Alexis González-del-Valle, CIP, CHSP
Who can establish an HSA?
Anyone may establish and contribute to an HSA if he or she meets all of the following requirements. He or she must
be covered under a high deductible health plan (HDHP) that is HSA-compatible;
not be covered by any other health plan that is not an HDHP (with certain exceptions);
not be enrolled in any part of Medicare; and
not be eligible to be claimed as a dependent on someone else’s tax return.
Anyone can contribute to an individual’s HSA (within the contribution limits). There are no age or income requirements to make or receive HSA contributions.
What are the requirements for an HDHP to be considered HSA-compatible?
For an HDHP to be considered HSA-compatible, it must meet minimum deductible and maximum out-of-pocket expense requirements for the applicable year, as defined by the IRS, subject to cost-of-living adjustments. These limits depend on whether the HDHP covers one individual (self-only coverage) or more than one individual (family coverage). Family coverage is an HDHP that covers an HSA-eligible individual and at least one other individual (i.e., spouse or dependent). The spouse or dependent does not have to be HSA-eligible.
Individuals should check with their health insurance providers to verify whether their health coverage is HSA-compatible.
Are there exceptions to the HDHP-only coverage requirement?
Yes, there are exceptions for coverage for accidents, disability, dental care, vision care, long-term care, permitted insurance, preventive care, certain prescription drug plans, limited-purpose health flexible spending arrangements (FSAs), limited-purpose health reimbursement arrangements (HRAs), suspended HRAs, post-deductible health FSAs or HRAs, and retirement HRAs that are not under an HDHP.
Permitted insurance consists of
insurance that covers specific diseases;
insurance under which the majority of the coverage provides benefits for liabilities incurred under workers’ compensation laws, tort liabilities, or liabilities related to the ownership or use of property; and
insurance that provides a fixed payment for hospitalization.
According to the IRS, prescription drug benefits are not classified as permitted insurance. Thus, if an individual is covered by an HDHP and by a prescription drug plan, the individual would not be eligible to establish an HSA unless the prescription drug plan is also an HDHP.
If someone’s HDHP coverage began midmonth, when would that individual be HSA-eligible?
HSA eligibility is determined on a monthly basis, based on HDHP coverage status as of the first day of a given month. In cases where HDHP coverage begins in the middle of the month, an individual that meets the HSA eligibility requirements would be eligible to establish and contribute to an HSA on the first day of the month following the month in which HDHP coverage started. For example, if Jane began her HDHP coverage on September 15, 2019, she would be eligible on October 1, 2019. But if Jane’s HDHP coverage had begun on September 1, 2019, she would have been eligible on the same day (September 1) because she had HDHP coverage as of the first day of the month.
