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Covered California Q&A

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.

Bought Bronze 60 HSA PPO. What About HSA Account?

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Question: I did not know that I was signing my husband up for the HSA PPO, I thought I was signing up for a regular Bronze PPO with covered ca. It's June, and I haven't opened a special HSA account at the bank, but he hasn't used his insurance yet either. What am I supposed to be doing?

Answer: It is not required that you open an HSA account just because you have purchased an HSA compatible health plan. But if you want to enjoy savings and tax benefits you should open an account now. Most banks offer HSA accounts. It's no more trouble than opening a checking or savings account. If you can open your account by July 1st, you will accrue 6 months of eligibility for the 2016 tax year. The annual contribution limit for an individual is $3,350 and for a family: $6,750. You can add another $1,000 annually as a "catch-up" benefit if you are over 55 yours old. Again, for 2016 your maximum contribution is one half of the annual limit. You can make contributions monthly or wait until the end of the year. Actually you have until April 15, 2017 to make your 2016 contribution. If you are interested in learning more about HSAs, google "health savings accounts".


THere is one caveat to the contribution limits:

If you make the full-year contribution for a year in which * your HDHP takes effect later than January 1st, * you may be subject to an IRS Testing Period and could owe tax and a penalty on part of that contribution * if you do not remain an eligible individual through December 31st the following year. * You may also need to pro-rate your contribution if you drop or reduce the level of your coverage mid-year.

This is not what Phil stated in his response. As long as your “eligibility” for any HDHP plan remains through December 31, 2017, contributions in 2016 will not be subject to taxation or penalties. To the contrary, it states proration of contributions is only required if you DROP your plan or reduce coverage before the end of the year.

It doesn’t matter when you open the HSA account, or when you deposit money into the account. You can add money up to the annual maximum in one deposit on December 31, 2016 if you want. i am not aware of any monthly proration or other limitation of contributions to the HSA. In fact, the “catch-up” contribution for persons age 55 or older can be made “at any time of the year in which the taxpayer turns age 55.”

The following are the only limitations I am aware of to be eligible to make deposits to an HSA as an individual:

Must be currently enrolled in an HSA-qualified health plan

May not be enrolled in any other non-HSA qualified health insurance plan*

May not have, or be eligible to use, a general purpose flexible spending account (FSA)**

Cannot be claimed as a dependent on another person’s tax return

May not be enrolled in Medicare, Medicaid or Tricare

Must not have used VA benefits for anything other than preventative services in the past three months unless receiving benefits for a service related injury or illness.

  • Must not have any other first dollar health insurance coverage before the deductible is met. Preventative care services are not required to be subject to the deductible. Individuals may also carry separate coverage for accidents, disability, dental or vision care, and long term care, not subject to the deductible.

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