How Insurance Coverage May Affect HSA Eligibility
By Agatha Schmidt, CISP, SDIP, CHSP
Are all high deductible health plans (HDHP) compatible with HSAs?
To make HSA contributions, an individual must be covered by a qualifying high deductible health plan (HDHP), and not be covered by a plan that is not an HDHP. Furthermore, when it comes to HSA contribution eligibility, not all HDHPs are created equal. Only certain HDHPs are compatible with HSAs; such HDHPs must meet certain minimum deductible and maximum out-of-pocket limits, which may change yearly because of cost-of-living adjustments. The limits for 2021 and 2022 are shown below.
May a spouse, who is not the primary-insured individual of an HSA-compatible HDHP, open an HSA?
Yes, as long as the spouse is also covered by the HDHP. If each spouse has an HSA, they must share the family contribution limit; they cannot each contribute the maximum amount for family coverage ($7,200 for 2021 and $7,300 for 2022). Spouses age 55 or older may each contribute up to $1,000 as a catch-up contribution to their own HSAs.
May adult children of an HSA-eligible individual open an HSA?
Possibly. The Patient Protection and Affordable Care Act of 2010 requires health plans that provide dependent coverage to make such coverage available to children until they reach age 26, even if the adult child is not eligible to be claimed as a dependent on the parent’s income tax return. Nondependent children, therefore, may be covered on their parents’ family HDHP, and if the parents are not eligible to claim them as dependents, such children could meet the eligibility requirements to open and contribute to HSAs. There is no official guidance indicating what the contribution limit would be for such individuals. But an IRS official commented to Ascensus that, assuming the nondependent child is otherwise HSA eligible, a separate family contribution limit ($7,200 for 2021 and $7,300 for 2022) would apply.
What if an HSA owner has secondary or supplemental insurance coverage?
To be eligible to contribute to an HSA, an individual must have HDHP coverage. The individual generally cannot be covered under a nonHDHP. There are, however, other types of coverage that individuals may have in addition to an HDHP—including coverage for accidents, disability, dental care, vision care, and long-term care. Certain “permitted insurance” is also allowed, such as insurance for a specified disease or illness, and insurance paying a fixed amount per day (or other period) for hospitalizations. For plan years beginning on or before December 31, 2021, insurance plans could have paid for telehealth and other remote care without first requiring an individual to satisfy a deductible.
May an individual contribute to an HSA if she is also covered by a Flexible Spending Account (FSA) or Health Reimbursement Account (HRA)?
An individual with HDHP coverage may be eligible to contribute to an HSA if she is also covered by a limited-purpose health FSA, a limited-purpose HRA, a post-deductible health FSA, or a post-deductible HRA. A limited-purpose health FSA or HRA only pays or reimburses permitted coverage benefits such as vision care, dental care, or preventive care. A post-deductible health FSA or HRA only pays or reimburses medical expenses related to preventive care or medical expenses incurred after the minimum annual HDHP deductible is satisfied. The post-deductible health FSA or HRA may not reimburse any medical expenses incurred before the annual HDHP deductible is satisfied, regardless of whether the HDHP covers the expense or whether the deductible is later satisfied. For more information on the interplay between HDHPs and FSA or HRA coverage for HSA eligibility purposes, see IRS Notice 2008-59.
