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 $1,400 for self-only coverage and $2,800 for family coverage in 2022. For 2022, maximum out-of-pocket expenditures cannot be more than $8,700 for an individual or $17,400 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, the annual deductible must not be less than $1,400 for an individual or $2,800 for a family in 2022. These plans are referred to as High Deductible Health Plans (HDHPs). But for individuals receiving cost-sharing reductions through the marketplace, many plans have low or even zero deductibles, or exempt certain services from your deductible to meet cost-sharing requirements. If your cost-sharing reductions bring your deductible 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. (May 10, 2021).

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