Open enrollment for healthcare plans starts November 15 and runs through February 15, 2015. That’s important if you’re shopping on a government-run exchange, the only place where you can qualify for tax credits or subsidies. (If you’re shopping on the open market, private insurance companies can sell you an ACA-qualifying policy yearlong. You can compare quotes here.) Wherever you decide to purchase healthcare coverage, one of the choices you may be offered is a high-deductible plan, which can be coupled with a health savings account -- usually called an HSA. If you’re interested in saving significant money on healthcare coverage, it could be a very good choice.
What is an HSA?
Health savings accounts are tax-advantaged savings account that let you deposit a portion of your income tax-free to be used for out-of-pocket medical expenses. Both you and your employer can make contributions to your account, there is no minimum contribution requirement, and you can contribute funds anytime up to the government cap (more on that in a moment). You own your HSA and can take it with you if you change jobs or quit. And unlike a Flexible Spending Account (FSA), which has an annual use-it-or-lose-it policy, money in HSA rolls over into the next year, and earns interest tax-free.
You can use the money in your HSA to pay for a medical expenses allowed by the federal government. Currently those include doctors’ office visits, hospital expenses, lab tests and diagnostic services, x-rays, dental care, prescription drugs, vision care and hearing aids. You also have the flexibility to use the money in your HSA for other purposes, but then whatever amount you use is considered taxable income, and there is an additional 10% penalty assessed.
You can buy your HSA from the same insurance company that sells you your health care coverage, or separately through a bank or other financial institution.
Caps on Contributions in 2015
The IRS has released its guidelines for 2015 HSA accounts. Here’s what you need to know:
- HSA-qualified plans must be high deductible. This year your plan must have a deductible no lower than $1,300 for an individual (that’s an increase of $50 from 2014) and $2,600 for a family (up from $2,500 last year).
- Contributions are capped at $3,350 for individuals and $6,650 for families. If you are 55 or older, you can add an additional $1,000, or $4,350 for individuals and $7,650 for a family.
- Maximum annual out-of-pocket expenses including deductibles, copays and other amount except premiums are capped at $6,450 for individuals and $12,900 for families.
How the ACA has Impacted Your HSA
A new study from the Manhattan Institute points out the Affordable Care Act has had some impact on HSAs including:
- Requiring HSA-qualified plans to offer the same 10 essential benefits as ACA-qualified plans, which may not be needed such as maternity care for post-menopausal women. It also requires HSA-qualified plans to have an actuarial value of 60%, meaning it must cover at least 60% of costs, something that was not required prior to the ACA. These requirements can limit your ability to trade off high premiums for a high deductible.
- ACA prevents the use of HSA funds for over-the-counter medicines.
- ACA raises the penalty if a person uses HSA funds to cover non-medical costs.
What Happens If You Move Your HSA to a Plan You Buy on an Exchange?
You may be able to find a plan on an Obamacare exchange such as Healthcare.gov with deductibles and out-of-pocket limits that are HSA-compatible. However, if you already have an HSA and you choose one of a plan on an exchange with a smaller deductible, you will no longer be allowed to make contributions to your account, but you will be allowed to use the funds already in your account for qualifying expenses.
 “History of Health Savings Accounts,” http://www.afcm.org/hsahistory.html
 “2015 HSA Contribution Limits, Deductibles, and Out-of-Pocket Expenses,” http://www.hsacenter.com/2015-hsa-contribution-limits.html
 “How Do Health Savings Accounts Work under Obamacare?” http://www.ncpa.org/sub/dpd/index.php?Article_ID=24971&utm_source=newsletter&utm_medium=email&utm_campaign=DPD