Are Obamacare plans HSA eligible? An HSA plan may help cover some of your medical expenses tax-free.
However, not all plans qualify as HSAs; many have been restricted by regulations issued under the Affordable Care Act.
What is an HSA?
HSAs (Health Savings Accounts) allow you to save pretax dollars for health care expenses without incurring an employer-established flexible spending account, with its set-it-or-lose-it deadline. An HSA, on the other hand, belongs to you directly and allows for unlimited saving potential.
HSAs allow you to make tax-deductible contributions that lower your taxable income and invest them tax-free for long-term growth.
An HSA is an excellent way to supplement a high deductible health plan (HDHP), offering numerous advantages.
How do HSAs work?
HSAs provide an ideal way for individuals with high-deductible health plans who wish to save for future medical expenses and are looking to set aside money in an HSA account tax-free. Individuals or employers can establish these accounts, with funds deposited growing tax-free as an HSA investment account.
HSAs differ from Flexible Spending Accounts (FSAs), in that they belong solely to you and can be funded at any time without incurring taxes – making them ideal for creating an emergency fund or retirement savings vehicle.
As an added benefit, pairing an Obamacare plan with an HSA can reduce your taxable income and qualify you for exchange subsidies; this can help avoid subsidy cliff and expand coverage.
Can I open an HSA with my current health plan?
Obamacare plans with high deductibles qualify as HSA eligible
To open an HSA, the first step is enrolling in a health plan with at least an annual deductible of at least $1,400 for individuals or $2,800 for families (also known as high-deductible health plans or HDHPs).
Your HDHP combined with an HSA allows you to save before taxes are assessed and pay qualified medical expenses tax-free, such as prescriptions, eyeglasses/contact lenses/contact lens solutions/cough medication copays as well as deductibles/co-insurance for dental/vision care services.
Your HSA funds can be used to pay for qualifying medical expenses at the point of sale or by requesting reimbursement from your insurance provider, provided that you keep records to support the claim and don’t lose receipts that support it. Stay organized so you don’t miss any potential reimbursement claims from insurers!
Can I get an HSA with an HRA?
An HSA and HRA are tax-advantaged vehicles designed to help cover medical expenses before taxes. But each has distinct rules.
HRAs are accounts held by employers and funded through group health plans that serve to reimburse eligible out-of-pocket medical expenses such as deductibles, copayments and coinsurance payments.
These accounts, however, are non-portable; they remain tied to your employer and do not qualify as investments. Should you change jobs or health plans, any money in an HRA will likely be lost forever.
HSAs, however, can be self-funded and portable; your HSA funds grow tax-free so you can invest them.
There are various strategies for combining an HSA with an HRA, but it is essential that you adhere to IRS rules in order to use both simultaneously. Here are the main ones:
