A lower-premium, high-deductible Health Savings Account (HSA) plan may help you save money.
Video on Health Savings Account (HSA) Plans
To gain a better understanding of Health Savings Accounts and how Obamacare affects them, check out the following video.
A Health Savings Account (HSA) is a tax-favored savings account that earns interest and that may be used in conjunction with an HSA-compatible, high-deductible health insurance plan (HDHP) to pay for qualifying medical expenses. Typically, the monthly premium on an HSA-compatible, high-deductible plan is lower than the monthly premium for a lower-deductible health insurance plan, so choosing an HSA plan may help you save money.
In 2017, the average individual paid $378 per month for an HSA-eligible health plan purchased at eHealth, while the average family paid $997 per month for an HSA-eligible health plan purchased at eHealth.
Contributions to an HSA may be made pre-tax, up to certain annual limits set by the IRS, as detailed below. In addition, funds in the HSA may be invested at your discretion, while unused funds remain in the account and accrue interest year-to-year, tax-free.
HSA Contributions and the Obamacare “Subsidy Cliff”
Contributing to your HSA also might help you avoid the Obamacare “subsidy cliff” that people have unfortunately faced in the past. The subsidy cliff refers to the fact that if you make a dollar more than 400% of the federal poverty level, your Obamacare subsidies disappear completely.
If you gave an estimation of your household income when applying for health insurance subsidies, and then ended up making more than that, you might have to repay some of the subsidy you received.
If you made enough that your Modified Adjusted Gross Income (MAGI) exceeds 400% of the federal poverty level, then your subsidy disappears entirely, which could mean you need to pay back thousands of dollars in subsidies.
This subsidy cliff could end up really changing how much you pay for health insurance, so it’s best to try and avoid it if you can.
The subsidy cliff for individuals in 2017 is triggered by only a $121 difference in income.
And in 2017, the family subsidy cliff can be caused by a $204 difference in income.
If you have an HSA, one way to avoid the subsidy cliff is by adding more to that account. Since contributions are pre-tax up to a certain limit, you can essentially decrease your reported income for Obamacare subsidy purposes, and avoid going above your projected income and lose either some, or all of your subsidy.
|2017 IRS Limits||2018 IRS Limits|
|Single Plan||Family Plan||Single Plan||Family Plan|
|Maximum Contribution Limit||$3,400||$6,750||Maximum Contribution Limit||$3,450||$6,900|
|Minimum Deductible (for HDHP)||$1,300
|$2,600||Minimum Deductible (for HDHP)||$1,350||$2,700|
|Maximum Out-of-Pocket||$6,550||$13,100||Maximum Out-of-Pocket||$6,650||$13,300|
|Maximum Catch-up Contribution Limit||$1,000||$1,000||Maximum Catch-up Contribution Limit||$1,000||$1,000|
Be aware that not all high-deductible plans are eligible for use in conjunction with an HSA, so do your research carefully and select the Health Savings Account plan that’s best suited to your particular needs.This article is for general information, so do not rely on this article as legal, tax, or accounting advice. You should consult your own legal, tax, or accounting advisor for advice on your particular situation. For additional information, visit eHealth’s HSA help center.