From the Hotline: Increasing Individual Deductibles for HSA’s

Question: Under the Affordable Care Act, can an employer increase the individual deductible of an HSA if they plan to increase the contribution amounts?

Answer: The direct answer is that it would be permissible because the annual deductible may be as low as the “minimum annual deductible” or as high as the “maximum OOP limit” set by IRS, or any amount in between.  Certain preventive care services are exempt from the annual deductible in accordance with the Affordable Care Act.

Additional general information:  Please note that an employee may contribute to a Health Savings Account (HSA), and/or may have employer HSA contributions made on his/her behalf, only if he/she meets all of the following HSA eligibility criteria:

  • Have qualifying High Deductible Health Plan coverage;
  • Do not have any disqualifying health coverage (called “impermissible non-HDHP coverage”);
  • Is not entitled to Medicare; and
  • Is not the tax dependent of another taxpayer.

“Qualifying HDHP” coverage – which sometimes is called “an HSA-compatible plan” – is a health plan with deductible and out-of-pocket amounts that meet IRS requirements.  IRS regulations establish the HDHP’s minimum annual deductibles and maximum out-of-pocket limits. (Note that deductible cannot be less than the minimum deductible amount, although it may be as high as the maximum out-of-pocket limit.  In any case, the deductible does not apply to certain preventive care services.)  The amounts are subject to cost-of-living adjustments each plan year.

Qualifying HDHP 2013 2014
Minimum annual deductible, self-only coverage $1,250 $1,250
Minimum annual deductible, family coverage $2,500 $2,500
Maximum out-of-pocket limit, self-only coverage $6,250 $6,350
Maximum out-of-pocket limit, family coverage $12,500 $12,700

 

Reference:  IRS Publication 969 (Health Savings Account) available at http://www.irs.gov/pub/irs-pdf/p969.pdf.