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Under the ACA, can I still have an individual HDHP and an HSA?

Q.  Under the ACA’s regulations, can I still have an individual HDHP and a health savings account (HSA)?

A.  Yes. There was initially some concern that high deductible health plans (HDHPs) wouldn’t be able to meet the ACA’s actuarial value requirements (at least 60 percent of average costs covered), but that was resolved prior to the 2014 launch of the ACA’s exchanges. HDHPs are well-represented among the ACA-compliant individual market plan options, both on and off the exchanges.

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 $10,000 individual deductible prior to 2014, those plans are no longer sold. But those plans weren’t HSA-qualified in the first place, 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 did away with plans with extremely high deductibles and out-of-pocket exposure, the new guidelines worked perfectly with the regulations pertaining to HSAs and 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 percent. But it doubled to 20 percent 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, withdrawals for non-medical purposes are simply taxed, but there’s no penalty.
  • Prior to 2011, HSA funds could be used for over-the-counter medicines. Since 2011, OTC medicines can only be purchased with HSA funds if a doctor prescribes them.

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 HSA regulations, no other claims can be covered before the deductible is met. These two regulations have co-existed well in 2014, 2015, and 2016, when all new HSA-qualified plans have also been ACA-compliant.

Out-of-pocket exposure: A growing gap

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 in 2015, the ACA began to allow maximum out-of-pocket limits even higher than those allowed for HSA-qualified plans. Under ACA guidelines, the maximum out-of-pocket for all plans in 2015 was $6,600 for an individual and $13,200 for a family. But HSA guidelines limited the maximum out-of-pocket on HSA-qualified plans in 2015 to $6,450 for individuals and $12,900 for families.

The gap increased in 2016. The maximum out-of-pocket for all plans under the ACA is $6,850 for an individual, and $13,700 for a family. But for HSA-qualified plans, the maximum out-of-pocket in 2016 is $6,550 for an individual, and $13,100 for a family.

And for 2017, the gap will widen even more. The maximum out-of-pocket limit on all plans will be $7,150 for individuals and $14,300 for families. But for HSA-qualified plans, the out-of-pocket limits will remain unchanged from 2016, at $6,550 for individuals, and $13,100 for families.

Clearly, HSA-qualified high deductible plans fit easily within the guidelines established by the ACA. And they have remained a very popular choice in the individual health insurance market since the bulk of the ACA’s reforms took effect in 2014. But while they have also been among the lowest-priced options on the market for the last few years, that may start to change in 2017. If other plans are offered with out-of-pocket maximums as high as $7,150 for an individual, they will likely have lower premiums than the HSA-qualified options, which will have to cap their individual out-of-pocket exposure at $6,550.

What about standardized plans?

There has been some worry about HSA-qualified plans being driven out by standardized plans, but so far, there’s nothing to substantiate that idea. HHS is introducing standardized plans for 2017 on Healthcare.gov, but they’ll be optional for carriers, and non-standardized plans will still be available. HHS finalized standardized plan designs at the bronze, silver, and gold levels, and did not include an HSA-qualified standardized plan design. But again, that doesn’t mean there won’t be HSA-qualified plans available, it just means that the HSA-qualified plans won’t be standardized.

In California, the exchange already requires all plans to be standardized, and they’ve got a standardized HSA-qualified plan design. So far, California is the only state that requires all plans to be standardized, but there’s no reason to assume that there wouldn’t be a standardized HSA-qualified plan on Healthcare.gov if that level of standardization were to eventually become required in the federally-facilitated 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 2016, plans with multiple family members must have individual out-of-pocket maximums that don’t exceed $6,850, and for 2017, that limit will be $7,150).

Embedded individual out-of-pocket maximums were already the norm on plans that weren’t HSA-qualified, but many HSA-qualified plans have traditionally utilized an aggregate family deductible and out-of-pocket maximum when more than one person is covered by the plan. Those plans must now embed an individual out-of-pocket maximum on all policies that have more than one covered family member.