What is a high-deductible health plan (HDHP)?
An HDHP is a health plan with a health savings account (HSA). HDHPs offer lower premiums, a higher medical deductible, and a higher medical out-of-pocket limit than most traditional health plans.
Here are some other features:
- If you cover yourself and one or more dependents, you must pay the entire family deductible before the plan begins paying benefits.
- Your medical and prescription drug costs count toward the annual deductible and out-of-pocket maximum.
What is a health savings account (HSA)?
An HSA is a tax-exempt account used to pay for IRS qualified out-of-pocket medical expenses (such as deductibles, copays, and coinsurance) including some expenses and services that your health plans may not cover. Anyone can deposit funds into an HSA on your behalf. You can deduct any amount you contribute from your taxable income, giving you a tax savings.
You can spend HSA funds on qualified expenses for your spouse or other tax dependents, even if they aren't covered on your medical, dental, and vision plans. Plus, the funds in your HSA roll over from year to year. That means your HSA balance can grow over the years, earn interest, and build savings that you can use to pay for health care as needed, or pay for Medicare Part B premiums.
Am I eligible?
The SEBB Program offers HDHPs with an HSA to eligible members through Uniform Medical Plan. The plans' HSA trustee is HealthEquity, Inc.
You must meet certain eligibility requirements to enroll in an HDHP with an HSA. If you enroll in an HDHP with an HSA and you are not eligible, you may be liable for tax penalties.
You are not eligible to enroll in a HDHP with an HSA if:
- You are enrolled in Apple Health (Medicaid).
- You are enrolled in Medicare Part A or Part B.
- You are enrolled in 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.
- You or your spouse or state-registered domestic partner is enrolled in a Voluntary Employee Beneficiary Association Medical Expense Plan (VEBA MEP), unless you convert it to a limited health reimbursement account (HRA) coverage.
- You are enrolled in a TRICARE plan.
- You enrolled in a Medical Flexible Spending Arrangement (FSA). This also applies if your spouse has a Medical FSA, even if you are not covering your spouse on your HDHP. This does not apply if your spouse's Medical FSA or HSA is a limited purpose account, or a post-deductible Medical FSA. If you try to enroll in both a Medical FSA and UMP High Deductible, you will only be in the UMP High Deductible with an HSA.
- You are 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 or contact your tax advisor.
What HSA contributions will my employer make?
You must establish an HSA with HealthEquity to receive any employer contributions. If you are eligible, HCA, on behalf of your employer, may contribute $375 for you or $750 for your family in your HSA. 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).
|People covered on HDHP
Monthly deposit to HSA*
|Total deposited by the end of the year
You and your family*
*If you have at least one other family member on your HDHP, then you qualify for the family contribution.
You will get 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.
What HSA contributions can I make?
Ask your employer if you can have pretax money deducted from your paycheck and deposited into your HSA.
You can also make post-tax contributions from your bank account and deduct the amount from your taxable income when you prepare your tax return. You will get a statement from HealthEquity to include in your tax return.
Are there contribution limits?
Yes. The IRS has annual limits for contributions from all sources into an HSA.
- For 2020, the contribution limit for a health savings account is $3,550 (subscriber only) and $7,100 (subscriber and one or more dependents).
- For 2021, the contribution limit for a health savings account is $3,600 (subscriber only) and $7,200 (subscriber and one or more dependents.
- If you are age 55 or older, you may contribute up to $1,000 more annually in addition to these limits.
It is your responsibility not to exceed the maximum annual contributions allowed under IRS rules. Before you make your own contributions, be sure to calculate your employer’s contribution(s) for the year and the SmartHealth wellness incentive in January (if applicable). If contributions from all sources are more than the maximum amount allowed, you may be subject to IRS penalties and/or fees from HealthEquity.
What happens to my HSA when I leave the HDHP?
If you choose a medical plan that is not an HDHP, 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, or you can leave them for the future. However, you and your employer may no longer contribute to your HSA.
- HealthEquity will charge you a monthly fee if you have less than $2,500 in your account after December 31. You can avoid this charge by either ensuring you have at least $2,500 in your HSA or spending all of your HSA funds before December 31. Other fees may apply.
- If you set up automatic contributions to your HSA either through your employer’s payroll office or to HealthEquity, you must contact them to stop the deductions.
Are there special considerations if I enroll in an HDHP mid-year?
Yes. Enrolling in an HDHP and opening an HSA mid-year may limit the amount of contributions you (or your employer) can make in the first year. If you have questions about this, talk to your tax advisor.