HDHP/HSA Plans and Medicare
Many employer groups offer health insurance plans that combine a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA). Some employers now offer these plans exclusively. Employees can benefit from these plans due to the potential premium savings and pre-tax HSA contributions that accumulate over time to help pay healthcare costs.
The challenge for many individuals who have opted into this type of coverage is the incompatibility HDHP/HSA plans have with other types of insurance, specifically Medicare. IRS rules prohibit contributing pre-tax earnings to an HSA once the individual is enrolled in Medicare Part A, B or both. In most cases, individuals collecting Social Security benefits will be automatically enrolled in both Medicare A and B when they turn 65. Those that delay Social Security benefits won’t be signed up for A or B automatically, and will have to opt in at a later date.
Possible impact to our members on HDHP/HSA plans:
- If the member turns 65 and is enrolled in a group plan with less than 20 employees, they are required to take Medicare A and B. In this case, Medicare will be the primary payer for healthcare claims. These individuals cannot continue to contribute pre-tax earnings to the HSA, however the accumulated funds can be retained and used to pay qualified healthcare costs.
- Individuals who are age 65+ who continue to work for an employer with over 20 employees can continue to contribute to the HSA with pre-tax earnings, as long as they are not enrolled in Medicare.
- NOTE: HSA contributions should discontinue six full months before the employee begins collecting Social Security benefits, as the Medicare Part A start date gets backdated six months from the time the individual applies for Social Security benefits.
There also may be additional factors to consider, such as Medicare enrollment due to disability. Helping your clients understand these rules can ensure that Medicare age members are aware and have a plan. The Social Security office and the HSA provider can be good sources for more information and complicated questions.