Medicaid and HSA

[Mr. Metal Mustache]

My wife's insurance is changing for the new year and beginning in 2020 she will have an HDHP with a HSA. Her employer also plans to contribute $2500 for the year and then she has the opportunity to contribute up to the remaining limit. She is also on Medicaid due to her pregnancy. Would this label her ineligible? Would she be able to to still have the HSA, make no contributes and then pay the 6% penalty on what the employer contributes? Medicaid would end upon the birth of the child. When looking through IRS publication 969 I only see the mention of Medicare, not Medicaid.

[Sibley]

Medicaid is state by state, so the IRS isn't the source you need. Go to your state's Medicaid site/rules/etc.

[ixtap]

In most states, won't having health insurance make her ineligible  for Medicaid?

[terran]

Yes, being covered by insurance other than the HDHP makes her ineligible to fund an HSA.

[Mr. Metal Mustache]

Iowa would be the state. If she is not eligible would she still be better off not making any contributions having the HSA and paying the penalty on the employer contributions since it would be one lump sum?