We were recently asked to clarify an individual’s eligibility to open a health savings account. Having a high deductible health insurance plan (HDHP) does not necessarily mean the HSA is a slam-dunk. There are still several other factors to consider before determining your eligibility to open an HSA, and we’ll cover them in this article.
#1. Enrollment in Medicare:
Enrollment in Medicare means you cannot fund an HSA. That includes the part of Medicare you are automatically enrolled in at age 65. If you’re on Medicare, don’t open an HSA.
If you already have a health savings account and are aging into Medicare, you don't need to close your HSA! Even though you're ineligible to make contributions, you can still use the existing funds tax-free to pay for any HSA-qualified medical expenses, earn tax-free interest on the standing balance, and utilize any applicable investment opportunities.
#2. Enrollment in Tricare:
Enrollment in Tricare means you cannot fund an HSA. If you’re on Tricare, don’t open an HSA.
On a side note, if your spouse is also on your insurance policy and is not enrolled in Medicare or Tricare, they may be eligible to open an HSA. The nice part about this, is you would be able to use the funds your spouse puts in their HSA. You can still benefit from the account; it just isn’t in your name.
#3. Enrollment in Multiple Policies:
If you are covered under another health insurance policy you may not be able to open an HSA. Exceptions to this scenario, would be another HSA-qualified insurance policy or one that is for a specific disease or illness – such as a cancer policy, or a policy that pays a fixed amount per day for a hospital stay.
#4. Having an Existing FSA:
Enrollment in a General Purpose Medical FSA (Cafeteria Plan) by you or your spouse can also affect your ability to fund an HSA. A General Purpose Medical FSA covers any medical expense of you or your spouse without first applying a deductible.
If your FSA covers just preventive care, dental and vision (called a Limited Purpose FSA) then you are fine to open an HSA.
If your FSA applies a deductible before payments are made (called a Post-Deductible FSA) then you may be able to open an HSA. It will depend on the deductible for the FSA. For 2013, that deductible would have to be at least $3,250 if it pays benefits on just you or $6,450 if it also pays benefits on your dependents.
#5. Usage of VA Benefits:
There is one more item worth mentioning here, and that is the usage of VA Benefits. Enrollment in VA Benefits does not affect your ability to open and HSA, but how and when you use those benefits can affect the frequency of how you fund your HSA.
In order to receive deposits into your HSA, you cannot have used your VA Benefits at any time during the previous three months, except for the three areas listed below:
- Preventative Care
Here’s a flyer with some examples of how your health savings account can work with your health savings account:
VA Benefits With Your HSA by American Health Value
That wraps up our list of the 5 most common scenarios that could potentially alter an individual's ability to open a health savings account. As you can see, the high deductible health insurance plan (HDHP) itself is the first thing you must have in place to open an HSA, but it is not the only factor taken into account when determining your overall HSA Eligibility.
As always, we are more than willing to help you navigate any of your questions about health savings accounts, whether you currently have yours with us or not. Please feel free to contact us with any questions or comments & we look forward to hearing from you!
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