Debunking the Myths of How HSA Plans Work Under the ACA Healthshare

Debunking the Myths of How HSA Plans Work Under the ACA

myth debunkedOpen enrollment for the Affordable Care Act has officially begun. Despite optimistic projections from pro-ACA factions like the Department of Health and Human Services, enrollment has not taken off as promised. I firmly believe that the biggest problem (aside from poorly designed websites that continually crash) is that people do not know any more about health insurance or health care reform than they did a year ago.

The different plans available are confusing, and the navigators who have been hired to assist applicants do not seem to have nearly the training necessary to answer any questions that might deviate from their prepared script. In addition to this, there is a lot of erroneous information circulating around.

In order to dispel some of the myths surrounding health care reform—and for our purposes here, the misinformation regarding health savings accounts—I have written this post to provide you with more accurate information.

Myth #1: HSA Plans Will No Longer Be Available in 2014

Although I understand why people might get the impression that HSA plans are no longer an option under the ACA, this is patently untrue. HSA plans can still be used, as long as they are combined with a health plan that is compliant with the Affordable Care Act’s requirements.

The combination of a high-deductible health plan and an HSA still remains one of the best ways to keep your health insurance costs down while benefiting from the tax breaks that come with them.

Myth #2: HSA Plans Do Not Meet ACA Requirements

Contrary to popular belief, HSA plans—or rather their corresponding high-deductible health plans (HDHPs)—have always been allowed to pay for preventive care and other services now mandated by the ACA. However, these services were never required to be paid for before the health care reform bill went into effect.

Now, just like all other health insurance plans that are available, all HDHPs are compliant with the Affordable Care Act. This means that preventive care procedures and most childhood immunizations are covered with no out-of-pocket costs charged to the consumer. There is no pre-existing condition waiting period, nor can anyone be denied coverage under an HDHP.

It has also been found that the ACA-required actuarial value of 60 percent (meaning the plan will pay 60 percent of the typical policyholder’s medical expenses in a year) will be met by all HSA/HDHP combination plans.

Myth #3: HSAs Will Be More Expensive in 2014

Having an HSA has historically been an excellent way to protect yourself from a catastrophic health event (for example, a major illness or accident necessitating extensive medical expenses). At the same time, these plans typically offer a much lower premium due to the fact that the policyholder pays a greater amount of his medical expenses out of his own pocket. This fact has not changed with the advent of the ACA.

In fact, the benefits of having an HSA have actually increased due to the Affordable Care Act. The maximum contribution limits have increased, which allows you a higher tax credit for your contributions. In addition, your adjusted gross income (AGI) will be lowered by the amount you contribute. This can actually make it so you have to pay even less for your insurance, as the premiums and out-of-pocket expenses are calculated using your modified adjusted gross income (MAGI).

Myth #4: Fewer People Are Choosing an HSA in 2014

Right now, HSA’s seem to work very well for those who are self-pay patients – but can be just as good for all type of patients. There is no data to confirm the rumor that HSA plans are becoming less popular amongst health consumers. In fact, more employers are choosing to provide coverage using an HDHP and HSA combination, as it lowers their costs while also providing the required coverage under the ACA.

I anticipate that, as the American public becomes more aware of the high cost of health insurance under health care reform, even more people will consider purchasing an HDHP and an HSA. It makes a lot of sense to allow consumers the freedom to shop around and receive lower prices on services, to not limit them to one provider, and additionally, to provide them considerable tax benefits.

Myth #5: You Cannot Purchase an HSA-Qualified Plan on the Health Exchange

This is completely untrue, and is perhaps one of those little-discussed plan options that ACA proponents do not want you to know about. After all, an HSA-compatible plan does not put quite as much money in the insurance companies’ pockets! There are several plans available on the health exchanges that are HSA-compatible.

We Advise to Not Purchase a Plan on the Exchange

Now that I have laid to rest some of the myths surrounding health care reform as they pertain to HSAs, I want to take the time to remind you of something I feel very strongly about. You may have gotten caught up in the panic and hype surrounding the ACA and feel like you need to log on to a health exchange immediately and make a purchase.

REMEMBER: You are not required to purchase a health policy of any kind on either the federal exchange or an exchange managed by your state—nor should you.

You are absolutely allowed to purchase your insurance off the exchange, and this is what I actually advise my clients to do—to instead go through a certified and experienced broker.

A good broker will help you understand your options on and off the exchange. He or she will make sure you are maximizing your tax credits, and will be there to assist if you have problems with the carrier. The cost will be the same, and sometimes is a lot less.

When you log on to a health exchange, you are not getting access to a highly trained and experienced insurance agent or broker. Instead, you are either completely on your own, or, if you contact the call center or use the live chat feature, you are being directed to a customer service representative (also known as a navigator) who more than likely has little to no experience in health insurance.

If you would like to talk to a professional—and I encourage you to do so before making any health insurance decision—please consider calling one of our licensed, experienced Personal Advisors at 866-749-2039.

As a team, we have made it our mandate to be informed and knowledgeable about all aspects of health care reform. We can discuss your budget and what you want and need in a health care policy, and can make the kinds of suggestions that will best fit you on a personal level.

Best of all, our services are offered at no cost to you. You are also under no obligation to purchase anything. We simply want to make sure you have all of the information you need to make an informed decision, and we want to make sure the information you have is accurate.

Author: Wiley Long
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.
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  • Chris

    Wiley,

    Your list of HSA administrators is out of date. Monthly investment fees for HSA Bank are now $5.50 a month. Balance waiver amount for 2013 is $4850 and for 2014 is $4950. seen here http://www.hsabank.com/~/media/files/fees_s1

    Saturna could be an interesting alterative for folks who would like to keep a smaller bank balance/higher investment balance and avoid fees. Saturna does charge $14.95 commission per stock trade and will charge $25 per year for inactive trading for entire year. For those who trade stocks 1-10 times a year and want to keep more money on investment side without fees, Saturna looks to be a good alternative to HSA Bank.

    I have no experience with Saturna, but on the surface it appears that Saturna is probably a better fit for the buy and hold investor that trades 1-10 times a year.

  • Wiley Long

    Hi Chris, thanks for the heads up!

  • dennis

    if i purchase a hsa on the exchange ,premium well be -0- why not purchase there???

  • Wiley Long

    Because you can get the same plan and same premium, less hassle, and the benefit of our expertise, by coming to us.

  • dennis

    in my state most people with income over 200% of fpl well be better off with a bronze hsa plan …..not much deference in non hsa silver plan deductible , max out of pocket and bronze hsa deductibles ,max out of pocket (500.00)but the premiums are over 100.00 per month less on bronze hsa plans the hsa well reduce your premium even more

  • dennis

    how can hsa of america get a hsa plan with a -0- premium without using the gov website?

  • Wiley Long

    As a consumer, you can use the government website if you want. But instead, you can avoid the hassle and come to us. We’ll endure the agony of dealing with the government exchange program, so you don’t have to. 🙂

  • dennis

    what well people need to do if their income changes a lot from year? they may not know if they well qualify for medicaid , or income is going to be over 100% of federal poverty level in non expanding state,

  • dennis

    if income is between 100%-138% of federal poverty level and you live in state that is not expanding medicaid, healthcare.gov want let you is want plans are available in your state.

  • Mark

    Can I opt out of my employer’s health plan? Several years ago I chose to leave my employer group plan and go with an HSA which is grandfathered in for 2014. I understand that if my employer offers health insurance and the employee portion is not greater than 8% that one cannot qualify for a subsidy. Is there a ruling that says I cannot purchase Health Insurance outside my employer?

  • Wiley Long

    Mark,

    You can definitely purchase health insurance outside your employer. But you are correct, that you would not qualify for a subsidy if your employer offers what is considered to be affordable health insurance, not costing you more than 8% of your income. Also, grandfathered plans are not eligible to receive a subsidy, you must purchase a new 2014 plan in order to qualify for premium and cost-sharing subsidies.

  • Debbie Scott

    general questions. I, 58 yo, was laid off 11/19/13 with insurance coverage until 11/30/13. it is an HSA and I am considering COBRA coverage. I’m looking to stay with BCBS. Is there an up and/or down side to picking up COBRA for 12/13 and new HSA BCBS policy on 1/14 vs picking up a new policy with BCBS effective 12/13.

  • Wiley Long

    Yes.

    In most cases, 2014 plans are much more expensive than 2013 plans. This is particularly true if you do not qualify for a subsidy.

    However, 2013 plans are subject to medical underwriting. If you have some health conditions that may prevent you from qualifying for a new plan, get a 2014 plan which will be guaranteed-issue.

    If you earn less than 400% of the federal poverty level, you may qualify for tax subsidies and even subsidies that could lower your deductible and coinsurance. Subsidies are available only on 2014 plans. More information is available at http://www.hsaforamerica.com/surviving-healthcare-reform-premium-subsidy.htm

  • Jessie

    You said “In fact, more employers are choosing to provide coverage using an HDHP and HSA combination, as it lowers their costs while also providing the required coverage under the ACA.”

    I keep seeing that HSA’s lower the cost for employers to cover their employees, but that is NOT the case with my employer. My employer contributes $198 per month with a regular health plan, compared to an HSA where they contribute $212 per month. How is this saving any money for my employer?

  • Wiley Long

    Jessie, to make a fair comparison, one would need to compare the benefits of both plans in great detail to possibly determine why the HDHP may cost the employer more than the other. There could also be reasons that the employer chooses to contribute more for a HDHP than a traditional plan. HDHP’s are known to encourage a healthier lifestyle, and insured individuals tend to take a more active role in staying healthy because of the high deductible factor, which could be contributing to the thought process of the employer contributing more for the HDHP than the other, likely leaving the employee with less out-of-pocket premium cost. PPO plans also generally cost more than HMO plans, which could be a factor if the other insurance offered was an HMO or POS, and if the choice of plans is offered through different insurance carriers, this could also lead to the price difference. In the end, it could also be that your particular case is one of the rarities.

  • Bill

    I have an HSA HDHP bronze plan from the ACA. Can an employer that doesn’t offer health care coverage contribute to my HSA? If so would this contribution still be considered tax free and not raise my gross income for tax reporting purposes?

  • Sam

    My spouse is covered on my HDHP through my employer. His employer, who does NOT offer group health insurance, contributes to each employee’s HSA who have a HDHP secured individually through ACA or other insurance. Can my spouse’s employer institute a policy that would require him to be the named policyholder of the HDHP in order to receive the contribution made by the employer? Comparability rules state you only need to be “covered” by an HDHP but do not get specifically into who the policyholder must be.

    • Hi Sam,

      In theory, yes. Your husband’s employer could attempt to block those contributions. However this seems like it would violate the spirit of what your husband’s employer is trying to do.

      Currently, to “legally” block your husband from contributing to their HSA with money from his work, the company would have to change their verbiage from more than simply “covered by an HDHP” as that clearly does not state he must be the policy owner.

      Of course if his work simply just stops giving him HSA money, you would have to challenge it and that can be impractical as well. But as it stands now, you are correct in that so far the rules as written from what you’ve given us to look at indicate that he can use that HSA money however he sees fit, which normally is how it should be since businesses these days are not going into group coverage.

      It would seem your husband’s employer is trying to find a way out of their initial commitment to their employees buy using the “covered elsewhere” situation. However, when HSA’s are involved, this can get murky since they are opting out of group altogether and telling the employee to go find coverage elsewhere and if it’s a HSA compliant plan they’ll give you some contribution money.

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