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In order to be eligible to make tax deductible contributions to an HSA account, you must have a qualifying HDHP (High deductible health plan). Among the requirements, is a deductible and max OOP within certain limits, which for 2016 has an upper bound of $13,100 for a family.

From my point of view, if the deductible and/or max OOP was higher than that, you still would have a "High deductible health plan". Perhaps it could be thought of as "Extremely High", but you would no longer be eligible to contribute to an HSA, which seems generally unfair to me. To make matters worse, the ACA plans available on the exchange are allowed to have a max OOP of $13,700, and after doing a quick search of them yesterday, it turns out that the majority of the plans are maxed out at $13,700, and thus are incompatible with an HSA.

What are the reasons for having an upper bound on the deductible of a qualifying HDHP? Is the fact that the exchange plans have a higher deductible just a mishap?

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The government wants to encourage everyone to buy health insurance, because with more healthy people buying health insurance, the rates can be reduced for those that are less healthy.

Ask yourself this: Why does the HSA require health insurance at all? Should you be able to make use of an HSA if you don't have any health insurance? The HSA is the carrot that the government holds out to get people that might decide to skip health insurance to buy it.

If they didn't have an upper limit on the deductible, you could buy health insurance with an extremely high deductible at an extremely low rate, and then it would essentially be like you didn't have any health insurance at all.

As to why the ACA law isn't coordinated with the HSA law, well, there are lots of issues with the ACA law, and this is only one of them....

  • I suppose it would be nice if Congress told the IRS and HHS to use the same algorithm for yearly max deductible adjustments. – TTT Jul 18 '16 at 20:04
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I suppose one reason is that you could have a health care plan structured such that it is nothing more than an additional retirement plan.

For example suppose a high income individual wants to save more for retirement. They could have an ultra-high deductible plan that they pay almost nothing for, but yet are able to take advantage of the triple tax savings of an HSA.

That makes the case of them being not a sky high limit, yet the limits are much lower than that.

It could also be the nanny state coming into play. That is legislators looking out for our best interest rather than a person arriving at their decision on their own.

I feel it is somewhat speculation as who can judge the thought process of congress? I mean other than: "Who is that intern?!?!" or "Spend, spend, spend".

  • While low for wealthy people, $13,700 is still pretty high for the middle class. – RonJohn Jul 13 at 21:07
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It seems this stems from which agency controls which maximum. For HSA limits the IRS is in control, for ACA compatible plan limits Health & Human Services (HHS) is in control. The IRS issued guidance in around May of 2015 including the upper limit of $13,100 for 2016, and in August HHS was more aggressive with the upper limits resulting in the $13,700 level you're seeing.

My speculation about catastrophic plans is irrelevant. Though you could speculate that the deviance of these two maximums is the result of a difference in objective between the two agencies. The IRS "loses" billions in tax revenue each year to tax-exempt vehicles related to healthcare (employer cafeteria plans, FSA, HSA, etc.) and may be seeking more modesty related to increases while HHS wants the most number of healthcare enrolled citizens (higher maximums can stem premium increases).

  • One place I worked had gold, silver, and bronze plans. The bronze was the best because with the other two the additional premiums were more than the savings in deductibles. While these were not HSA plans, it all depends on how the plans are structured. – Pete B. Jul 18 '16 at 17:39
  • Good information about the limits being set by different departments. Here's an article that talks more about the increasing gap: healthinsurance.org/faqs/… – TTT Jul 18 '16 at 19:56
  • I'm not completely on board with your last paragraph though. I don't think the IRS "seeks" to do anything except interpret the law, which is set by Congress, not the IRS. I would guess that the difference isn't due to objectives, but rather the IRS algorithm for adjusting the max OOP is simply different than the one used by HHS. And perhaps neither can change their algorithm unless Congress tells them to. – TTT Jul 18 '16 at 20:00
  • @TTT List I said, it's my own speculation and likely over simplified; to your point the IRS didn't write the rules. It's my view that the tax preference given to many healthcare related expenses is under attack and might not be much longer for this world. – quid Jul 18 '16 at 20:08
  • Interesting speculation. – TTT Jul 18 '16 at 20:15

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