In my opinion, Health Savings Account (HSA) eligible health insurance plans should be some of the cheapest plans. After all, to be HSA eligible, the health insurance plan must have a high deductible and a high out-of-pocket maximum as set by the IRS each year.
However, because an HSA is such a desirable account type and because almost all deductibles have risen above the HSA-eligible high deductible health plan (HDHP) line, the HSA-eligible plans this year are actually quite expensive.
That being said, there is a trick to getting the full benefit of an HSA while saving a bit of money.
In order to qualify for an HSA, you need primarily to be covered under an HSA-eligible plan, not be enrolled in Medicare or covered under another health insurance plan, and not be claimed as a dependent on someone else’s tax return. Health savings accounts, like IRAs, are individually owned accounts. You can’t have a joint HSA. However, you can withdraw money from your HSA for qualified medical expenses incurred by you, your spouse, or your dependents.
Even though HSAs are individual owned, you can contribute twice as much to your HSA every year if you have a family plan. In 2019, the HSA contribution limits are $3,500 if you have an individual plan and $7,000 if you have a family plan. According to the IRS, “Self-only HDHP coverage is an HDHP covering only an eligible individual. Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual).” Meaning, you qualify for the family HSA contribution limit if you have two individuals both covered on the same insurance plan.
Thus, the HSA savings trick is that you put the youngest adult and youngest child in your family on the same HSA-eligible health insurance plan, while everyone else in the family is on the cheapest catastrophic plan you can find.
To demonstrate the savings, I’m going to use my own Albemarle County family of three as an example, but the same analysis can be repeated in a different county and for a different family.
First off, here are my two plans of consideration in Albemarle Country. The cheapest plan is Anthem’s catastrophic plan and the cheapest HSA eligible plan is also offered by Anthem.
|Maximum Out of Pocket|
|Anthem HealthKeepers Catastrophic||$7,900||100%||$7,900|
|Anthem HealthKeepers Bronze X 4900 for HSA||$4,900||35%||$6,700|
Here are the monthly premiums for each of my family members.
|Dad (age 28)||Mom (age 27)||Child (age 2)|
|Anthem HealthKeepers Catastrophic||$293.71||$283.17||$206.70|
|Anthem HealthKeepers Bronze X 4900 for HSA||$395.49||$381.30||$278.34|
There are two often overlooked facts here. First, when you make a family plan, the providers actually just add the monthly premiums of each individual on the plan together. Second, older individuals always cost more.
Thus, if we all purchased the HSA eligible plan it would be $395.49 + $381.30 + $278.34 for a total of $1,055.13 per month.
Meanwhile, if only my daughter and I (the youngest child and youngest adult) purchased the HSA plan, it would cost $381.30 + $278.34 for a total of $659.64 per month. If my husband purchased the catastrophic plan that would cost him $293.71, bringing our family total to $953.35 per month.
Regardless of whether we all purchase the HSA plan or only my daughter and I do, we get to contribute the family contribution limit ($7,000 in 2019) and can pay for all of our expenses, my husband included, out of the HSA.
Thus, by putting my husband on the catastrophic plan, we save $101.78 per month or $1,221.36 savings per year.
You can expand this to larger families for more savings. The more older individuals you take off of the more costly HSA plan, the more of a discount you get on acquiring a family plan HSA.
Photo by Alberto Casetta on Unsplash