QUESTION

I've been told I should look for a Health Savings Account (HSA) compatible plan on the health insurance Marketplace. What is an HSA-compatible plan and what are the pros and cons of enrolling in one?

Individuals with coverage | Individual and Marketplace Health Coverage |
ANSWER

An HSA-compatible plan is a “High Deductible Health Plan” (HDHP) with an annual deductible that is not less than $1,600 for self-only coverage and $3,200 for family coverage in 2024. For 2023, maximum out-of-pocket expenditures cannot be more than $8,050 for an individual or $16,100 for a family.

The benefit of a HDHP is lower monthly premiums, but the disadvantage is that in the event that you become ill, this high deductible means that your health insurance does not kick in until you have paid that amount out-of-pocket. High deductible plans can be beneficial if you don’t anticipate incurring health expenditures regularly and you have sufficient disposable income to fund the HSA or pay for health care services out-of-pocket until you meet your plan’s deductible. High deductible plans can be risky if you have not set money aside and experience an unexpected need for health care services.

If you are under 250 percent of the federal poverty level, you qualify for cost-sharing reductions that could make your plan incompatible with an HSA. Under IRS rules, for a health plan to qualify as an HSA-compatible HDHP, the annual deductible must not be less than $1,600 for an individual or $3,200 for a family in 2024. But for individuals receiving cost-sharing reductions through the marketplace, if you your deductible is below the deductible requirement under an HSA-compatible plan, then the plan will no longer qualify as HSA-compatible. In this circumstance you can choose whether or not to take the cost-sharing reductions or have an HSA, but not both.

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