HSAs are increasing in popularity and now are one option in over a quarter of employer sponsored insurance plans. According to the Kaiser Survey eighty-three percent of covered workers have a general annual deductible for single coverage that must be met before most services are paid for by the plan. Twenty eight percent of firms offer an HDHP (high deductible health plan) with a funding arrangement (HSA or HRA). (Kaiser Family Foundation Survey)
The AHCA, currently under consideration by the Senate, hopes to make HSAs a major vehicle for individual insurance policies. Beginning next year, the proposal raises the basic limit on HSA contributions to at least $6,550 for self-only coverage and $13,100 for family coverage, nearly double the current contribution limits. AHCA also lowers the taxes on distributions used for expenses other than qualified medical expenses. In addition, the legislation would allow the use of HSA funds for expenses incurred before the plan was established, going back 60 days or to the HDHP enrollment date.
Pending those changes, the IRS has announced smaller increases in the HSA limits for 2018. The contribution limits for individual accounts rise to $3,450 (from 2017’s $3,400). Family coverage rises to $6,900 (from 2017’s from $6,700). Maximum out-of-pocket figures are also up: for single coverage to $6,650 (from 2017’s $6,550) and for family coverage to $13,300 (from 2017’s $13,100). The minimum deductible for an HDHP is $1,350 for Self-only, $2,700 for Family.
It is important to note that HSA plans have limits in addition to the contribution and HDHP requirements. Everything except preventive care must be subject to the deductible.
- Prescription drugs. Plans may not cover nonpreventive prescription drugs with only a co-pay before an individual or family meets the annual deductible.
- Office visits. Excluding preventive care such as physical checkups or immunizations, plans may not cover office visits with only a co-pay, without having to meet the annual deductible first.
- Emergency. Plans may not cover emergency services with a co-pay outside the deductible.
These plans are understandably popular with milennials, who don’t anticipate large medical expenses but can benefit from the tax deductible contributions and tax free growth of account balances. With cost pressure on employers increasing and the government dedicated to expanding HSA use this structure is the future of health insurance.