ADEA Washington Update

Changes May Be Coming to High-Deductible Health Plans and Catastrophic Plans

(ACA, Legislation, House, Senate, HHS) Permanent link   All Posts

The Department of Health and Human Services (HHS) is promoting high-deductible health plans (HDHPs) that can be used in conjunction with tax-favored health savings accounts (HSAs) on the exchange. The IRS defines an HDHP as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family. HHS claims that HSAs help consumers make more cost-efficient health-care decisions. However, Democrats and Affordable Care Act (ACA) supporters argue that HSAs primarily benefit wealthier consumers who can afford to take money from their paychecks to contribute to an HSA.

In 2017, nearly 500,000 individuals in the 39 states using the federal exchange enrolled in HSA-eligible HDHPs, which made up 6% of federal exchange enrollment that year. Enrollment in HSA-eligible plans has grown significantly since HSAs first became available in 2004, but there has been “very little growth” in enrollment from 2014 to 2017, according to the Employee Benefit Research Institute.

In 2014 when the ACA Exchanges opened, they included high-deductible catastrophic plans, which usually have lower premiums. They were not eligible for ACA premium tax credit subsidies and could not be paired with HSAs. Individuals can receive tax-free distributions from their HSA to pay or be reimbursed for qualified medical expenses incurred—this includes dental treatment and expenses.  

The House of Representative passed H.R. 6311 and H.R. 6199 in July to expand the use of tax-advantaged HSAs, increase contribution limits for HSAs, and broaden the types of health plans that can be used with them. Similar legislation hasn’t been introduced in the Senate.

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