A. If you enroll in a high-deductible health plan (HDHP), you’ll be eligible to fund an HSA.
(Note that in 2021, due to the COVID pandemic, there’s a special enrollment period that runs through August 15 in most states; this window is an opportunity to obtain coverage for 2021, without having to wait until January 2022 for coverage to start. It’s also an opportunity to take advantage of the American Rescue Plan’s enhancement of premium subsidies.)
Your goal in choosing a health insurance plan likely involves keeping your total costs as minimal as possible, while ensuring that you have access to the services and providers you need.
And when you run the numbers on what each health plan will cost you, you’re apt to focus on two main factors: premiums and out-of-pocket costs. But remember, there’s a less obvious form of healthcare savings you might reap, depending on the plan you choose, and it’s the tax savings associated with a health savings account (HSA).
Are you eligible to contribute to an HSA?
HSAs let you contribute pre-tax dollars to pay for qualified medical expenses. In 2021, you can contribute up to $3,600 to an HSA as an individual, or up to $7,200 at the family level (these amounts will increase to $3,650 and $7,300, respectively, in 2022). And if you’re 55 or older, you get an additional $1,000 on top of whichever limit applies to you.
To qualify to contribute to an HSA, you must sign up for a high-deductible health plan (HDHP). A plan is not an HDHP just because it has a high deductible; HDHPs also have to follow other rules laid out by the IRS. In 2021, an HDHP must have a deductible of $1,400 or more for individual health coverage, or $2,800 or more for family health coverage. An HDHP’s out-of-pocket maximum cannot exceed $7,000 for individual coverage or $14,000 for coverage at the family level (note that these limits are lower than the out-of-pocket maximums that apply to non-HDHPs). In 2022, the minimum deductibles will remain unchanged, but the maximum allowable out-of-pocket cap for an HDHP will increase to $7,050 for an individual and $14,100 for a family.
HDHPs cannot pay for any non-preventive services before the aforementioned minimum deductibles are met. But with an HDHP, you’re entitled to certain free preventive care services before the deductible is met. And, there are new rules in place that allow insurers the option to provide treatment for certain chronic conditions, like asthma and diabetes, under the preventive care umbrella, as well as testing and treatment for COVID-19. If your insurer offers these additional benefits, you may be eligible to receive covered treatment before meeting your deductible. Plus, you can use your HSA funds to pay your deductibles under your HDHP.
How to find an HDHP
HDHPs are available through the Affordable Care Act’s marketplaces in almost all areas of the country, and can be found at the Bronze, Silver, and Gold levels. The higher the metal level your plan falls under, the more the plan covers enrollees’ average healthcare costs, and the less the enrollees pay (based on average costs for a standard population):
|Affordable Care Act’s metal level plans|
|Metal level||Plan pays||Enrollees pay|
|Bronze||60% of costs||40% of costs|
|Silver||70% of costs||30% of costs|
|Gold||80% of costs||20% of costs|
|Platinum||90% of costs||20% of costs|
Your premium costs will generally rise as you go from level to level, so that a Silver plan charges a higher premium than a Bronze plan, and a Gold plan charges a higher premium than a Silver plan (that’s not always the case, now that the cost of cost-sharing reductions is being added to silver plan rates; Gold plans in some areas are less expensive than Silver plans). But since premiums and deductibles tend to have an inverse relationship, the higher your premiums, the lower your deductibles. It’s for this reason that HDHPs are more commonly found at the Bronze and Silver levels.
When you explore your plan options through HealthCare.gov or the state-run exchange in your state, each listing will indicate whether the coverage is HSA-eligible. Keep in mind that some plans with higher deductibles won’t qualify as an HDHP because their out-of-pocket maximums exceed the aforementioned thresholds, or because they cover part of the cost of non-preventive services before the minimum deductible is met (for example, they offer copays for office visits, instead of requiring the member to pay the full network-negotiated cost of office visits until the deductible is met).
Is an HDHP right for you?
To give you a sense of what an HDHP might cost you, consider this:
In 2021, a family of three (two adults in their mid-40s plus one 10-year-old dependent) in Chicago with an income of $100,000 (ie, normally not eligible for premium subsidies, but eligible for a subsidy of $277/month in 2021 due to the American Rescue Plan) could purchase a Bronze-level HDHP at a monthly premium of $772 (after the subsidy is applied), with the deductible and out-of-pocket maximum both equal to $7,000 (double that amount for the family).
Meanwhile, a Gold plan (non-HDHP) with a monthly premium of $1,021 (after the subsidy is applied) comes with an annual deductible of $2,900 for the whole family, primary care copays of $15, specialist copays of $35, and a total family out-of-pocket cap of $12,600 for the year. The higher-cost Gold plan includes more robust coverage. But the family would not be eligible to contribute to an HSA with this plan, and would spend about $250 in additional premiums each month.
Obviously there are trade-offs on both ends of the spectrum, and no single solution that works for everyone. And even if you’re set on an HSA-qualified plan, you’ll want to be sure to compare other plan features and costs (like the scope of your provider network and prescription formulary) to land on the right decision.
HDHPs can be a smart choice because they open the door to HSA contributions, which can defray or, in some cases, completely cover the costs of the deductibles you then face (assuming you’re willing and able to contribute to your HSA). As you weigh your health plan options during open enrollment — or during a special enrollment period if you have a qualifying event — you may find that it pays to switch to an HDHP in order to capitalize on the tax savings HSAs offer.