Health Plans on the Exchange - Many High Deductibles, but few HSA/HDHP Compliant

[rantk81]

One of my "FIRE Planning/dreaming activities" is looking at the ACA health exchange plans.  I've looked at a lot of different plans for the city where I live, and at other "potential retirement" cities across the country.

Something that is VERY PUZZLING to me:

A great majority of the plans have very high deductibles -- so high that they would meet the IRS guidelines to be a HDHP (HSA-eligible) plan.

However, it seems like these plans almost "go out of their way" to make them HSA-ineligible.

For example, the plan I'm looking at right now would fit the HDHP/HSA criteria in every way EXCEPT for it offers a ridiculous (and almost completely useless) $25 co-payment on preferred generic drugs that isn't subject to the deductible.  (Mind you, preferred generics are generally those same drugs that most pharmacies offer for $10 or even $4 as a cash price.)

I've noticed similar things on many many many different plans, from different insurance companies, in different geographical locations.  What the hell is going on with this?

I have noticed that the (very few!) HSA-compliant plans that I have been able to find on the ACA exchange, often have a much higher monthly premium than similarly featured barely-non-HSA-compliant plans that I mentioned above.

What gives?

[rantk81]

Giving this a bump... I can't be the only one who has noticed this, right?

[themagicman]

I am not sure. I have noticed this though. Many plans being $50 too high on the out of pocket maximum for example. You would think it would drastically hurt enrollment into their plan. My only thought would be that there must be a lot of regulation and excess paper work to have a hsa eligible plan and this makes them not have that overhead?

[bacchi]

If you buy a slightly ineligible HSA plan, who's going to check?

[Altons Bobs]

If you buy a slightly ineligible HSA plan, who's going to check?

The IRS will fine you if you contribute to an HSA without an HSA health plan.

[Paul der Krake]

I've noticed that too. It was very frustrating when I was on the individual market with no subsidies. In the future, I will just keep my taxable income artificially low to qualify for the maximum subsidy.

My tinfoil hat theory is that insurers go out of their way to make them ineligible to cut down on customer support issues. HSA are still not well understood by the public, and it costs money to man the phones to explain how they work to Joe Schmoe.

[bacchi]

If you buy a slightly ineligible HSA plan, who's going to check?

The IRS will fine you if you contribute to an HSA without an HSA health plan.

True enough but that doesn't answer the question: who is going to check?

[Paul der Krake]

If you buy a slightly ineligible HSA plan, who's going to check?

The IRS will fine you if you contribute to an HSA without an HSA health plan.

True enough but that doesn't answer the question: who is going to check?

Tax fraud is illegal and a bad idea regardless of the can-I-get-away-with-it factor.

[MrUpwardlyMobile]

If you buy a slightly ineligible HSA plan, who's going to check?

The IRS will fine you if you contribute to an HSA without an HSA health plan.

True enough but that doesn't answer the question: who is going to check?

Tax fraud is illegal and a bad idea regardless of the can-I-get-away-with-it factor.

This.  Tax fraud is a crime.  This is not the place for advice on committing a crime.

[bacchi]

If you buy a slightly ineligible HSA plan, who's going to check?

The IRS will fine you if you contribute to an HSA without an HSA health plan.

True enough but that doesn't answer the question: who is going to check?

Tax fraud is illegal and a bad idea regardless of the can-I-get-away-with-it factor.

This.  Tax fraud is a crime.  This is not the place for advice on committing a crime.

Advice? Who's giving advice? It's a question.

[Altons Bobs]

If you buy a slightly ineligible HSA plan, who's going to check?

The IRS will fine you if you contribute to an HSA without an HSA health plan.

True enough but that doesn't answer the question: who is going to check?

Tax fraud is illegal and a bad idea regardless of the can-I-get-away-with-it factor.

This.  Tax fraud is a crime.  This is not the place for advice on committing a crime.

Advice? Who's giving advice? It's a question.

No one is going to check until you get in trouble. And if you're doing it, you know you're knowingly committing a crime.

[Loren Ver]

One of my "FIRE Planning/dreaming activities" is looking at the ACA health exchange plans.  I've looked at a lot of different plans for the city where I live, and at other "potential retirement" cities across the country.

Something that is VERY PUZZLING to me:

A great majority of the plans have very high deductibles -- so high that they would meet the IRS guidelines to be a HDHP (HSA-eligible) plan.

However, it seems like these plans almost "go out of their way" to make them HSA-ineligible.

For example, the plan I'm looking at right now would fit the HDHP/HSA criteria in every way EXCEPT for it offers a ridiculous (and almost completely useless) $25 co-payment on preferred generic drugs that isn't subject to the deductible.  (Mind you, preferred generics are generally those same drugs that most pharmacies offer for $10 or even $4 as a cash price.)

I've noticed similar things on many many many different plans, from different insurance companies, in different geographical locations.  What the hell is going on with this?

I have noticed that the (very few!) HSA-compliant plans that I have been able to find on the ACA exchange, often have a much higher monthly premium than similarly featured barely-non-HSA-compliant plans that I mentioned above.

What gives?

Getting us sorta back on topic, I have a related question.  Are you planning on retiring, finding an HSA complaint plan and then continuing to add money to it?  I didn't know you could add money without an income, or you would at least lose the tax advantage of lowing your income by using an HSA. 

I'm trying to see how this might apply to my family once we pull the job plug.  Our income will be from investments, or diverting money from an investment into an HSA seems odd. Unless you are using it like a funnel to get money from taxed accounts to untaxed accounts (with more restrictions) or you plan on having working income and want to shelter it.

LV 

[rantk81]

Getting us sorta back on topic, I have a related question.  Are you planning on retiring, finding an HSA complaint plan and then continuing to add money to it?  I didn't know you could add money without an income, or you would at least lose the tax advantage of lowing your income by using an HSA. 

I'm trying to see how this might apply to my family once we pull the job plug.  Our income will be from investments, or diverting money from an investment into an HSA seems odd. Unless you are using it like a funnel to get money from taxed accounts to untaxed accounts (with more restrictions) or you plan on having working income and want to shelter it.

LV

You do not need any reported earnings in order to contribute to an HSA.
Yes, my thoughts were along the lines of diverting money from regular non-tax-advantaged investment accounts.

Consider the scenario of:

You are converting some funds from Traditional pre-tax IRA into a Roth IRA.  There is some taxable "income" there.... but then in the same tax year, you take some of your non-retirement investments and shovel them into your HSA -- then you can deduct that amount from your "income" that you had from the "Roth Conversion" above...

[DaMa]

HSA/HDHP compliant plans actually cost more than the same plan without the HSA compliance.  This is because you will use more services, because you have the HSA to pay for them.  Thus you are more likely to get past the deductible, and once you get there, you will certainly use more services.  The insurance companies design plans that are non-compliant because they are cheaper, but look better to consumers.

So the $25 copay on some generic drugs will cost the insurance plan approximatley $0, but it will reduce overall costs 2-5% due to decreased use on all services.

[rantk81]

@DaMa Wow.  That seems pretty perverse to me, that an insurance company would "figure" that "oh, this plan participant is able to receive a juicy tax deduction, so let's jack up their premiums and effectively just steal that incentive for ourselves (the insurance company.)"

Wow.  Just Wow.  Guess I'm not surprised that an insurance company would "think" that way...