Under the ACA's regulations, can I still have an individual HDHP and a health savings account (HSA)?
Yes, you can still have an HDHP and an HSA, and there are HDHPs in the ACA-compliant market in nearly all areas of the country. But fewer people are enrolling in these plans in recent years, and there are not as many HDHPs available as there were a few years ago. HHS noted in 2023 that while 8% of Marketplace enrollees selected HDHPs in 2019, that had dropped to 5% by 2022. And while HDHPs had accounted for 7% of all the available Marketplace plans in 2019, they accounted for just 3% of available plans in 2023.
There have been some changes over time in terms of how HDHPs have been viewed by federal regulators. Starting in 2019, HHS began considering ways to encourage more insurers to offer HDHPs, and “exploring how to use plan display options on HealthCare.gov to promote the availability of HDHPs to applicants.” For HSA-eligible plans in 2021, HealthCare.gov displayed the plan with a blue banner that said “Eligible for a health savings account.” This was a more prominent notice than the one that was used prior to 2020, but HealthCare.gov no longer uses this differential display as of 2023.
And in a regulation that limits the number of non-standardized plans (including HDHPs, which are not standardized on HealthCare.gov) that insurers would be able to offer via HealthCare.gov as of 2024, HHS said “We believe the fact that there is a steadily decreasing number of issuers choosing to offer these plans [HDHPs], as well as a steadily decreasing number of consumers choosing to enroll in these plans, reflects both issuer and consumer preference evolving away from these types of plan offerings.”
If you’re shopping the exchange, you can still filter the available plans to only show HSA-eligible options, if that’s your preference. HSA-qualified plans often have “HSA” in the plan name, but that’s not always the case. So using that filter tool when you’re comparing plans is a good way to make sure you’re not overlooking any plans.
Very high-deductible plans (which have never been HSA-qualified HDHPs) are no longer allowed under the ACA. So for example, while it was possible to buy a plan with a $15,000 individual deductible prior to 2014, those plans are no longer sold (the highest allowable out-of-pocket exposure in 2023 is $9,100 for an individual, including the deductible, coinsurance, and any other in-network out-of-pocket costs; this upper limit on out-of-pocket costs will increase to $9,450 in 2024. But those very-high-deductible plans were never HSA-qualified, even before the ACA, as their out-of-pocket expenses were too high. HSA-qualified high deductible plans have always had upper limits on out-of-pocket exposure, much the way the ACA now imposes such limits on all plans.
So while the ACA prevented new plans from having extremely high deductibles and out-of-pocket exposure, the new guidelines worked well with the regulations pertaining to HSAs and HDHPs.
How the ACA changed HDHPs
The Affordable Care Act did change a couple of rules regarding HSAs, effective in 2011:
- Prior to 2011, the penalty for HSA withdrawals for non-medical purposes was 10%. But it doubled to 20% on January 1, 2011. Account holders can avoid this fee as long as they either use their HSA funds for medical expenses OR wait to withdraw funds until they’re at least 65. After that, income tax applies to withdrawals for non-medical purposes, but there’s no penalty.
- Prior to 2011, HSA funds could be used for over-the-counter medicines. But under the ACA, from 2011 through 2019, OTC medicines could only be purchased with HSA funds if a doctor prescribed them. That changed in 2020, however, with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which permanently relaxed these rules, retroactive to January 1, 2020. Under the CARES Act, HSA funds can be used to pay for OTC medications, and also menstrual products, without the need for a prescription.
Under ACA regulations, HSA-qualified plans (like all plans) must cover preventive care with no cost-sharing and without requiring the insured to meet the deductible first. Under the IRS’s HSA regulations, no other claims can be paid by the health plan before the deductible is met (although the IRS expanded the rules in 2019, to allow more services to be considered preventive care under HSA-qualified plans, and paid by the insurer pre-deductible). These two regulations have co-existed well since 2014, when all new HSA-qualified plans have also been ACA-compliant.
But state health insurance mandates do present a potential conflict with IRS rules for HDHPs. States can require additional benefits, going above and beyond the ACA’s reforms. If a state requires benefits that exceed the IRS limits for HDHPs, however, it can result in the plans losing their HDHP status.
An example of this is pre-deductible coverage for male contraceptives. A few states have mandates requiring health plans to cover male contraception pre-deductible, but the IRS does not consider male contraception to be preventive care. To address the issue, the IRS provided transitional relief, through 2019, to anyone covered on a plan that would otherwise be an HDHP, but which also included pre-deductible coverage for male contraception. The idea was to give states time to revise their laws to except HDHPs from the male contraceptive mandates, without penalizing enrollees in the meantime.
As a result of the COVID-19 pandemic, the IRS also relaxed the rules to allow HDHPs to pay for COVID-19 testing and treatment pre-deductible without compromising the plan’s HSA eligibility. That provision ends at the end of 2024. (To clarify, all health plans were required to pay for the cost of COVID testing during the public health emergency, which ended in May 2023. After that, HDHPs have the option to continue to cover COVID testing and treatment pre-deductible without losing HDHP status, but only through 2024.)
How do out-of-pocket limits for HDHPs compare to other plans?
The IRS has always limited out-of-pocket caps for HDHPs. Prior to 2014, there was no rule for how high out-of-pocket limits could be for non-HDHPs, but the ACA changed that, starting in 2014.
In 2014, the out-of-pocket maximums for individual health plans under the ACA were the same as the limits on HDHPs: $6,350 for individuals and $12,700 for families. But since then, the out-of-pocket limit for non-HDHPs (set by HHS each year) has generally grown faster than the out-of-pocket limit for HDHPs (set by the IRS each year).
The maximum out-of-pocket limit on all plans in 2023 is $9,100 for individuals and $18,200 for families. For HSA-qualified plans, the out-of-pocket limits are quite a bit lower, at $7,500 for an individual, and $15,000 for a family. But for 2024, the gap will actually get a little smaller: The maximum allowable out-of-pocket limits will be $9,450/$18,900 for non-HDHPs, but it will grow significantly for HDHPs; those plans will be able to have out-of-pocket limits as high as $8,050 for an individual and $16,100 for a family.
Clearly, HSA-qualified high deductible plans fit easily within the guidelines established by the ACA. But while they were among the lowest-priced options on the market in the early years of ACA implementation, that has begun to change as the maximum allowable out-of-pocket exposure on non-HDHPs has climbed quite a bit higher than the maximum allowable out-of-pocket exposure on HDHPs.
Higher out-of-pocket costs generally go hand-in-hand with lower premiums, which means that there tend to be several plans in most markets that are now priced lower than the available HDHPs. And while HDHPs were primarily in the bronze and silver metal levels in 2014, they’re becoming more common in the gold level. But by and large, HDHPs do continue to be among the lower-priced options in each area.
How do standardized plan rules affect HDHP availability?
There was initially some worry about HSA-qualified plans being driven out by standardized plans, but that has not come to pass — yet. HHS introduced optional standardized plans on Healthcare.gov starting in 2017, and included a bronze HDHP in the standardized plan designs for 2018. But they did away with the standardized plan designs as of 2019.
Standardized plans returned to HealthCare.gov as of 2023 plan year, but HHS clarified that they were not including a standardized HDHP, and would instead allow HDHPs to simply be part of the suite of non-standardized plans that insurers could offer. But for 2024, HHS is limiting the number of non-standardized plans that insurers can offer through HealthCare.gov. And they note that “while we acknowledge that this limit may affect HSA-eligible HDHP offerings, we do not believe that an exception to the limit is warranted for these plan offerings as there has been a steady decrease in both the proportion of HSA-eligible HDHP offerings and enrollment in these plan offerings (especially at the silver, gold, and platinum metal levels) over the past several years.”
So it would not be surprising if there are fewer HDHP options available in 2024 and future years, particularly in states that use HealthCare.gov.
In California, the exchange requires all plans to be standardized, and they’ve always had a standardized HSA-qualified plan design (California is the only state that doesn’t allow any non-standardized plans to be sold on the exchange).
Embedded individual out-of-pocket maximums
One market-wide change that took effect in 2016 requires that all family plans include embedded individual out-of-pocket maximums that don’t exceed whatever HHS has set as the individual out-of-pocket maximum for that year (so in 2023, plans with multiple family members must have individual out-of-pocket maximums that don’t exceed $9,100).
Embedded individual out-of-pocket maximums were already the norm on plans that weren’t HSA-qualified, but many HSA-qualified plans traditionally utilized an aggregate family deductible and out-of-pocket maximum when more than one person was covered by the plan. So for example, an HDHP with a $10,000 family deductible used to be able to require the full $10,000 deductible to be met before services were covered, even if just one family member needed medical care. Those plans must now embed an individual out-of-pocket maximum on all policies that have more than one covered family member, and the individual out-of-pocket maximum cannot exceed the maximum individual out-of-pocket exposure that HHS sets for all plans for the year.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.