Employers are finding that many employees are interested in HSAs and the health plan that makes them possible: the high deductible health insurance plan (HDHP).
HSAs offer many benefits, but they continue to be a complex area for consumers and employers to navigate. Additionally, although the Affordable Care Act didn’t directly change HSAs, it has affected HDHPs.
As we head into 2017 and beyond, keep an eye on the ACA for any ripple effects on HDHPs, including the definition of preventive care, the Cadillac tax, and the Health and Human Services rules issued regarding requirements for standardized health plans offered on state insurance exchanges in 2017.
(Related: 11 Medicare Mistakes to Avoid)
Also, there are some lesser known aspects of HSA regulations that employers and consumers might not know about. Here are 10 FAQs to consider as we look ahead to 2017.
FAQ #1: What would happen to HSAs if the law prevented future HSA contributions?
If the ACA did impact either an HSA owner’s health plan or health plans in general in a manner that would cause individuals to lose HSA eligibility, existing HSA owners could continue to use any amounts in their HSA for qualified medical expenses even if no longer eligible to contribute more. This is important to know in case changes do make HDHPs less available. The HSA remains one of the best tax-favored options available. A good strategy is for people to accumulate assets now in the HSA to prepare for future changes that might occur.
This article is excerpted from 2017 Health Savings Accounts Facts published by the National Underwriter Company, a division of ALM.
Read on for more FAQs about HSAs.
FAQ #2: What are the HDHP deductible limits?
A critical component of the definition of an HDHP is the deductible. A self-only HDHP must have a deductible of at least $1,300 (2017) and the family deductible must be at least $2,600 (2017). HDHPs must also have a maximum out-of-pocket limit.
FAQ #3: Will HDHPs be offered on state exchanges in 2017?
A 2016 ruling by Health and Human Services will likely limit or possibly even eliminate HDHPs from state insurance exchanges starting in 2017. On March 8, 2018, HHS issued its annual notice titled “HHS Notice of Benefit and Payment Parameters for 2017.” In the details of this notice are two rules that will likely eliminate HDHPs from the state health exchanges starting in 2017, at least for standardized plans (the rules allow insurance companies to offer non-standardized plans, which may retain HSA eligibility).
The first rule is HHS’s use of the maximum out-of-pocket costs for plans offered at the various metal levels on the exchanges. For silver and bronze plans, HHS is moving to the higher out-of-pocket maximums. This will result in the loss of HSA eligibility for those plans and the plans will no longer qualify as HDHPs.
The second rule is HHS’s requirement that plans offered through the state exchanges provide for primary care visits, specialist visits (at the silver and gold levels), mental-health/substance use disorder outpatient services, and more before the deductible is met. HSA rules require that the HSA owner pay amounts below the deductible. HSA rules provide exceptions, including for preventive care, but the new HHS requirements do not appear to meet those exceptions.
FAQ #4: Does the Affordable Care Act’s maximum deductible limit for the small group market impact HSAs?
No. The Affordable Care Act included the small group market provisions described below. However, in 2014 Congress passed legislation signed by the President eliminating these provisions retroactively to the passage of the ACA (The Protecting Access to Medicare Act of 2014).
The rule would have required small groups that currently offer higher deductible HDHPs to lower their deductibles. The ACA imposed a maximum deductible for the small group markets of $2,000 for individuals and $4,000 for families. Although these deductible levels remain HSA-eligible in 2017, the lower limits would have increased premiums in the small group market.
Even before the law change, Health and Human Services issued regulations allowing for some flexibility for increased deductibles in the small plan market. The regulations allowed a health plan’s annual deductible to exceed the annual deductible limit ($2,000/$4,000) if that plan could not reasonably reach the actuarial value of a given level of coverage without exceeding the annual deductible limit. This flexibility is no longer necessary given the repeal of the law.
FAQ #5: Does Department of Veterans Affairs (VA) health coverage disqualify someone for an HSA?
Starting in 2016, veterans are not disqualified from HSAs by reason of receiving medical care for service-connected disabilities under programs administered by the VA.
The IRS issued further guidance in IRS Notice 2015-87, providng a safe harbor for what is a “service connected disability.” The notice provides the following: