We offer a high deductible health plan with an HSA to our employees. If the deductible is embedded, how does this impact the HDHP’s limits for 2019?

In order for an individual to be eligible to open and contribute to an HSA, they must be enrolled in a qualified HDHP and in no other disqualifying coverage (no “first-dollar coverage”). A qualified HDHP cannot pay any benefits before the minimum statutory deductible is met ($1,350 for self only HDHP and $2,700 for family HDHP in 2019). There is also a maximum out of pocket (OOP) limit for QHDHPs ($6,750 and $13,500 for 2019, respectively).

There is a special rule regarding embedded deductibles for individuals with family HDHP coverage. In order for the health plan to remain an HSA-qualified HDHP, the plan cannot pay benefits for an individual under the family tier of coverage until the minimum statutory family deductible has been met. This is tied to the statutory family deductible, not the plan’s family deductible. So, benefits could not be paid for an individual with family HDHP coverage in 2019 before the insured has met at least $2,700 of the deductible.

For example, Pat is enrolled in self-only HDHP; his deductible is $1,500. All covered expenses are paid 100 percent after he has met his deductible.

John, Jane and Junior are enrolled as family on an HDHP. The whole family has to meet $3,000 deductible for everyone’s expenses to be paid 100 percent for the rest of the year. If any one individual in the family has $2,700 in expenses, that one person has met the individual embedded deductible and has their own covered expenses paid 100 percent while the other family members continue to accumulate up to $3,000. Typically, one person in the family tends to meet their full deductible in the year. So, the scenario could be Jane has $2,700 in expenses and meets her embedded individual deductible, John has $100 and Junior has $200. Then claims would be paid 100 percent for all members going forward. Another way they could meet the family deductible would be if Jane incurs $1,000, John incurs $1,500 and Junior incurs $500. In this case, the embedded deductible was never triggered, but would still be a qualified HDHP.

Additionally, there are separate ACA rules to consider. The ACA OOP max for 2019 is $7,900 for individual coverage and $15,800 for family (for 2019). Non-grandfathered plans must have embedded individual max OOPs with family coverage. HHS guidance confirms that the ACA’s self-only annual cost-sharing limit acts as an embedded limit when an HDHP provides coverage other than self-only coverage (that is, family HDHP coverage). In other words, if an individual stays in-network, then under no circumstances should that individual pay more than $7,900 (in 2019), even if it is non-embedded/aggregate.

Therefore, putting these rules together (the embedded minimum deductible under QHDHP and embedded max OOP under ACA), this could result in an individual embedded maximum OOP being less than the plan’s family deductible. For example, if a carrier says that an individual must meet $10,000 in OOP (to match the family deductible), that design would be out of compliance with the ACA requirement.

So, the embedded OOP for an individual with QHDHP family coverage in 2019 must meet both of these conditions:

  • At least $2,700 (the statutory family deductible for QHDHPs)
  • Equal to or less than $7,900 (the statutory ACA individual max OOP)

As another example, four individuals (A, B, C and D) are enrolled in family coverage with an OOP max of $13,500. A incurs $10,000 in covered expenses, and B, C and D each incur $3,000 in covered expenses. Since the self-only max OOP applies to each person ($7,900 in 2019), A’s cost sharing is limited to $7,900, and the plan has to pay the difference ($10,000 - $7,900). With respect to cost-sharing incurred by all four individuals, the aggregate is limited to $13,500, so the plan has to pay the difference ($7900 + $3000 + $3000 + $3000 = $16,900), which is $16,900 - $13,500 ($3,400).