Health savings accounts (HSAs) (non-Medicare)

What is a health savings account (HSA)?

An HSA is a tax-advantaged account, which means money you contribute is not taxed. When you enroll in a CDHP, you are automatically enrolled in an HSA. The PEBB Program also contributes to your HSA each month.

With an HSA you can pay for:

• IRS qualified out-of-pocket medical expenses (like deductibles, copays, and coinsurance) including some expenses and services that your health plans may not cover. 
•  Qualified expenses for your spouse or other tax dependents, even if they aren't covered on your medical, dental, and vision plans.

Your HSA balance can grow over the years, earn interest, and build savings that you can use to pay for health care as needed. The money is yours, even if you change health plans.

After you’re 65, you can withdraw HSA dollars for any expense – you’ll just need to pay income taxes.

What is a consumer-directed health plan (CDHP)?

A CDHP is a high-deductible health plan (HDHP), with a health savings account (HSA). CDHPs offer lower premiums, a higher medical deductible, and a higher medical out-of-pocket limit than most traditional health plans.

Other features

• If you cover yourself and one or more dependents, you must pay the entire family medical deductible before the plan begins paying benefits.
• Your medical and prescription drug costs count toward the annual deductible and out-of-pocket maximum.

Kaiser Permanente NW, Kaiser Permanente WA, and Uniform Medical Plan offer CDHPs. Visit benefits and coverage by plan for coverage details.

Is a CDHP right for me?

Generally, CDHPs work well for people who:

• Can meet the eligibility requirements.
• Prefer a lower monthly premium.
• Want to save on taxes by contributing to an HSA through pretax payroll deductions.
• Are willing to check which services and supplies are qualified HSA expenses.
• Can keep track of HSA expenses in case of an IRS audit.

CDHPs can encourage you to make informed decisions about your health care and spend HSA funds wisely. Those who enroll in a CDHP should prepare to invest time and energy in seeking qualified HSA expenses from network providers.

Who is eligible?

You must meet certain eligibility requirements to enroll in a CDHP with an HSA. If you (the subscriber) are not eligible and enroll, you may be liable for tax penalties.

To be eligible to enroll in a CDHP, you cannot be enrolled in:

• Medicare Part A or Part B or Medicaid.
• Another health plan that is not an IRS-qualified high-deductible health plan — for example, on a spouse’s or state-registered domestic partner’s plan — unless the health plan coverage is limited coverage, such as dental, vision, or disability coverage.
• A Voluntary Employee Beneficiary Association Medical Expense Plan (VEBA MEP), unless you convert it to a limited health reimbursement account (HRA) coverage. (This includes you or your spouse or state-registered domestic partner.)
• A TRICARE plan.
• A Medical Flexible Spending Arrangement (FSA) or Health Reimbursement Arrangement (HRA). This also applies if your spouse has a Medical FSA, even if you are not covering your spouse on your CDHP. This does not apply if the Medical FSA or HRA is a limited purpose account, or for a post deductible Medical FSA.  
• You also cannot be claimed as a dependent on someone else’s tax return.

Other exclusions apply. Check IRS Publication 969—Health Savings Accounts and Other Tax-Favored Health Plans, contact your tax advisor, or call HealthEquity toll-free at 1-877-873-8823(for Kaiser members) or 1-844-351-6853 (for UMP members) to verify whether you qualify. See The Complete HSA Guidebook for full details.

Can I enroll in a CDHP and Medicare?

No. If you are enrolled in a CDHP with an HSA when you or a covered dependent become entitled to Medicare Part A and Part B, you must choose a new medical plan that is not a CDHP. The PEBB Program must receive your request no later than 60 days after the Medicare enrollment date.

If your covered dependents become entitled to Medicare Part A and Part B, you must either:

• Choose a medical plan that is not a CDHP and keep your Medicare dependent enrolled in PEBB coverage. Your annual deductible and annual out-of-pocket maximum will restart with your new plan.
• Remove your dependent from your PEBB coverage before they enroll in Medicare Part A and Part B. The dependent will not qualify for COBRA or other continuation coverage through the PEBB Program.

What contributions are allowed?

PEBB Program contributions

After your HSA is established with HealthEquity, you can start to receive contributions.

The contribution goes into your HSA in monthly installments over the year on the last day of each month (the entire HSA amount is not available on January 1). 

The PEBB Program will contribute the following amounts to your HSA: 

You will receive an additional $125 in your HSA (deposited at the end of January in the following calendar year) if you qualify for the SmartHealth wellness incentive.

Your contributions

The IRS has annual limits for contributions from all sources into an HSA.

• For 2023, the contribution limit for an HSA is $3,850 (subscriber only) and $7,750 (subscriber and one or more dependents).
• For 2022, the contribution limit for an HSA is $3,650 (subscriber only) and $7,300 (subscriber and one or more dependents).
• Members ages 55 or older, you may contribute up to $1,000 more annually in addition to these limits.  

How do I contribute?

Call HealthEquity to set up direct deposits to your HSA. You may be able to deduct your HSA contributions from your federal income taxes.

To make sure you do not go beyond the limit, consider the PEBB Program's contributions, your contributions, and the SmartHealth wellness incentive in January (if you qualify). Use the HSA contribution calculator.

What happens to my HSA when I leave the CDHP?

If you choose a medical plan that is not a CDHP you should know:

• You won’t forfeit any unspent funds in your HSA after enrolling in a different plan. You can spend your HSA funds on qualified medical expenses in the future. However, you and the PEBB Program can no longer contribute to your HSA.
• HealthEquity will charge you a monthly fee if you have less than $2,500 in your HSA after December 31. You can avoid this charge by either ensuring you have at least $2,500 in your HSA or by spending all of your HSA funds by December 31. Other fees may apply. Contact HealthEquity for details.
• If you set up automatic contributions to your HSA through HealthEquity, you must contact them to stop the deductions.