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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


What Happens to My HSA Account?

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Question: I currently have a large amount of money in a HSA bank account. If I choose a non-HSA plan, what does this mean for my HSA account and use of the money for medical expenses?

Answer: If you choose a health plan other than a HSA-qualified plan, you can no longer make pre-tax contributions to your existing HSA account. The HSA account itself does not change and you may withdraw money from the account to pay for qualified medical expenses on a tax free basis as well.

16 Comments

To make a contribution to an HSA, the taxpayer must enroll in a High Deductible Health Plan. On CoveredCA, the only HDHPs are Bronze plans. If you and your husband are not both enrolled in an HDHP then only a single contribution may be made to the HSA, not a family contribution. Your silver plan expenses (not premiums) can be paid from the HSA, but you could not have your own HSA nor could your husband contribute more than $3550 to his HSA (+$1000 if he’s over 55).

Nothing prevents you from having a silver plan and your husband having a bronze plan. Both would be eligible for premium tax credits if you enroll through CoveredCA. You probably have to make separate applications and make some adjustments to the APTC values based on total household income. You still have to indicate Married Filing Jointly on the application, not Married Filing Separately.

Under Covered California both spouses have to buy the same Health insurance. For example my Husband needs a Bronze HSA and I would like the Silver since I don’t have an HSA account. He has a free HSA at the bank so he would like to keep it. What are my options? If he opts for the Bronze HSA, then do I have to have one too, and open my own HSA account at the Bank? Or can I use his HSA bank account?

If you are considering a HSA plan, then be sure to determine whether the plan’s deductible is “embedded” or “aggregate”.

Both spouses do not have to have the same health plan — unless you plan on contributing for both spouses to an HSA. To contribute to an HSA, you must have purchased as High Deductible Health Plan. Both spouses may use a single HSA — the contribution amount is also higher (almost double) at $6550 (+$1000 for any taxpayer age 55 or older).

Unfortunately, the only HSA compatible plans through CoveredCA are at the Bronze level and force you to consume much of your medical expenses ($4500 per person) as first-dollar out-of-pocket costs — which is not necessarily a requirement of HDHPs. HDHPs are available off-the-exchange which have family deductibles as low as $2500 — a savings of up to $6500, with premiums about the same as through CoveredCA.

Question: Before the health care reform one spouse has an HSA bank account and the other does not. Can both spouses use 1 HSA account? When you sign up for Health coverage now, both plans have to be the same.

Max - your name links to a misspelled version of your URL, so no one can find your site. It is missing the “i” in “services”

Cindy …

You should find THREE HSA-compatible plans: Anthem Bronze 60 EPO, Blue Shield Bronze 60 PPO, and Kaiser Bronze 60 HMO.

If you like your Aetna PPO, you will probably find the Blue Shield PPO to your liking as well.

Unfortunately, the plan deductible at Covered CA is $9000 for a “family” (two or more insureds), with $12,700 maximum out-of-pocket in addition to annual premiums. Premiums will depend on your ages (I plugged in adult age 40 and child under 18 and came up with about $356 per month, without premium tax credits).

You could save money in the long run by giving up contributing to an HSA and choosing the Blue Shield Platinum PPO instead, with $0 deductible deductible and $8,000 maximum out-of-pocket. Premium (based on ages stated above) is $592 per month.

Sadly, the BRONZE metal tier under the ACA is designed as the worst-case scenario for HSA-compatible plans. The annual out-of-pocket limits permitted are based on allowable HDHP maximums. Congress has done folks who want to save money on a tax-preferred basis to pay for their health care no special favors. You get a relatively small tax deduction in exchange for whopping out-of-pocket expenses and 40% coinsurance.

Pay an additional $3000 per year, without the deduction, and save up to $4700 in total out-of-pocket expense. Net difference = $1700 in your favor (in a year with high medical expenses). In a year with average expenses, it could be a toss-up.

On the other hand, and to your benefit, it may be harder to reach that out-of-pocket limit because the Platinum plan’s benefits greatly reduce your outbound cashflow. And that effectively improves the $1700 in savings by every dollar you would spend under a Bronze plan in search of the $9000 deductible and $12,700 out-of-pocket limit, compared to the $0 Platinum deductible.

The concept is perhaps confusing, and the math is a little complex, but it’s the kind of number-crunching I do all the time as a Life & Disability Analyst. Last I heard, there were only 24 of us currently licensed in CA, compared to the 150,000+ Accident & Health agents (of which I am also one).

Click on my name to find my website and use the Contact Us! page to get in touch with me if you would like some help making a choice for 2014.

Thank you. But is it correct that only bronze plans are HSA compatiple? A bronze plan pays for so little—and certainly doesn’t meet my needs. But then, it already appears that I’m going to pay approximately $5,000 more a year in premiums for anything equivalent to the excellent Aetna PPO that I have now for my daughter and me. Absolute and total INSANITY!

You will find HSA plans when you run a quote at our site - http://service.cahba.com . Narrow your quote results to Bronze plans. You will find 2 plans available in your area - Blue Shield Basic PPO for HSA and Kaiser Bronze 60 HSA.

I live in the 92694 area code (Orange County.) When I go to the site, I can find no information whatsoever on which plans are HSA compatible. If anyone has specific information, I’d love to hear it.

Cindy … it’s not possible to answer your question without knowing where you reside. Each geographic region has its own selection of participating plans.

However, when using the “Shop & Compare” tool at CoveredCA.com, you will find most or all HSA-compatible plans in your area on the BRONZE tier, and possibly also on the SILVER tier.

I have a basic question that I can’t find the answer to. Which of the individual plans on the California exchange are HSA compatible, if any? I do not qualify for subsidies.

Phil’s answer is correct. You own the HSA and the money in the account can remain and “grow tax-free” or be used to pay for “qualified medical expenses” for you, your spouse, and your dependents if you choose a non-HSA plan. However, if you choose a non-HSA plan then you can no longer make pre-tax contributions to your HSA account.

Sorry back to you Dan, but IRS Publication 502 clearly demonstrates the HSA funds may be used for any qualified medical expenses, even if not covered by an HDHP. Read that publication and be informed.

Sorry but once you no longer have an HSA eligible health plan you CANNOT use the funds in your HSA account for ANYTHING. Any money you take out is subject to taxes and penalties even if you use them for medical expenses until you turn age 65. Then the penalties disappear but the taxes remain. You should correct this.

Just remember that “qualified medical expenses” do NOT include premiums. You will be heavily penalized for doing that.

There are several HSA-compliant HDHP plans available on the Covered California exchange if you qualify for premium tax credits. If you don’t qualify for premium tax credits, however, you will still find a much wider choice of HDHP plans off the exchange.

Because all HDHP plans must include the “essential health benefits” (such as preventive health services with no cost sharing — no copays or coinsurance and not subject to the deductible) and provide “minimum essential coverage” (not less than 60% actuarial value) there is no disadvantage to remaining in an HDHP other than your out-of-pocket cost, which will be no more than any of the lowest value Bronze plans, and the premium will be less. The advantage is that you get to use tax-free dollars to pay for those expenses, which effectively reduces your out-of-pocket cost in direct relation to your marginal or effective tax rate.

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