A Health Savings Account (HSA) is a tax-exempt savings account that can be used to pay for certain medical expenses. HSAs are only available with certain high-deductible health plans. With an HSA plan individuals are allowed to put money away and withdraw it tax-free, for qualified medical expenses. Individuals using untaxed dollars in an HSA to pay for these expenses may be able to lower overall healthcare costs. You can read more about them on our blog about HSAs HERE.
A high-deductible health plan (HDHP) is a health insurance plan with a large deductible for medical expenses. Also referred to as a consumer-driven health plan HDHPs usually have a larger annual deductible, but individuals can be charged lower monthly premiums. HDHPs can be any type of health insurance plan, including a preferred provider organization (PPO) or health maintenance organization (HMO) plan.
What are the Annual HSA Contribution Limitations:
On May 16, 2023, the IRS released the 2024 inflation-adjusted amounts for health savings accounts (HSAs) and high deductible health plans (HDHPs).
- Self-coverage only: $4,150 ($300 increase from 2023)
- Family coverage: $8,300 ($550 increase from 2023)
- Annual catch-up contribution maximum:
- $1,000 for HSA-eligible individuals age 55 or older (unchanged from 2023)
- Minimum annual HDHP deductible:
- Self-coverage only: $1,600 ($100 increase from 2023)
- Family coverage: $3,200 ($200 increase from 2023)
- Maximum annual HDHP out-of-pocket expenses (deductibles, copayments, and other nonpremium amounts):
- Self-coverage only: $8,050 ($550 increase from 2023)
- Family coverage: $16,100 ($1,100 increase from 2023)
You can check if a high deductible health plan (HDHP) is HSA compatible by checking your policy’s coverage details or contacting your insurance company directly.
An HDHP can be combined with a health savings account (HSA), allowing you to pay for certain medical expenses with money free from federal taxes.
How HSAs work with HDHPs
A health savings account allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. See IRS Publication 502 (PDF) for more information.
- By using pre-tax dollars in an HSA to pay for deductibles, copayments, coinsurance, and other qualified expenses, including some dental, drug, and vision expenses, you can lower your overall healthcare costs.
- You can contribute to an HSA only if you have an HSA-eligible HDHP.
How to find an HSA-eligible HDHP.
When you compare plans on HealthCare.gov, HSA-eligible HDHPs are identified on plan cards by an “HSA-eligible” flag in the upper left-hand corner. Individuals can also filter to see only HSA-eligible plans by using the “Filter” option in the right-hand corner and selecting the “Health Savings Account (HSA) Eligible Plans” filter.
We highly recommend that you speak with the team at AUI. Allow us to help you through the process of finding the right HSA plan. The best part, you will not pay more to have our team help you find it. Leverage our knowledgeable experts and gain a point person for all your questions that arise throughout the year. Often, the health insurance plan from your employer may also be HSA compatible.
Why do HSA Limits Vary from ACA?
HSA plans use a different cost-of-living index than the one used for group health plans under the Affordable Care Act (ACA.) HSAs are considered “above-the-line” or pre-tax deductions. They will not factor into household income. Determining eligibility for subsidizing benefits is calculated separately.
Not all ACA healthcare plans qualify for Health Savings Accounts. These amounts are different from the ACA maximum out-of-pocket limits for plan years beginning in 2024 (proposed by the Department of Health and Human Services in December 2022.)
Your existing plan may not qualify to be grandfathered into the new year if:
- Self-coverage only: $9,450 ($350 increase from 2023)
- Family coverage: $18,900 ($700 increase from 2023)
Unlike the HDHP out-of-pocket maximums, the ACA out-of-pocket maximums apply to in-network essential health benefits. Under ACA regulations, HSA-qualified plans must cover preventive care with no cost-sharing and without requiring the insured to meet the deductibles first. Your deductible may be higher than the HSA limit. You must also consider that you won’t be able to make deposits to your HSA account.
Need Help Understanding the New Regulations?
It is important to note that not all HDHPs are HSA-eligible. To contribute to an HSA, your HDHP must meet specific criteria defined by the IRS, including minimum deductible and maximum out-of-pocket limits. It’s best to consult with your healthcare provider or insurance company to ensure that your HDHP qualifies for an HSA.
Overall, combining an HSA with an HDHP can provide individuals with tax advantages and a way to save for medical expenses while benefiting from lower monthly premiums. Call AUI we can help you find a HAS-compatible plan. Or, help you determine if your current plan is compatible. Don’t go through this process of picking a healthcare plan alone. Remember choosing AUI does not cost you more money, but it does allow you to leverage our experts to navigate all of the options and help you understand how to leverage the solution that is right for you and your business or your family.
