HSA contribution ideas

[puneetswami9]

We are a MFJ couple and We just had our first child on 1/15/23. My wife's health insurance plan is low cost non HSA qualifying one but since the coverage to a nearby large hospital is great, we are planning to enroll myself (husband) and our newborn to the same plan provided by her employer 

So far I have maintained my own health plan HSA/PPO coverage one as single person where I was able to make contributions to my HSA account and my employer made a minor contribution as well.

Question I am trying to assess is:

We want to enroll in my wife's insurance as that is low cost and has great coverage in area where we live but at the same time I want to take advantage of HSA contribution.

I have below option from my employer:

A. Employee only: 

B. Employee + Spouse 

C. Employee+ Child(ren)

 D. Employee+ Family 

My employer makes some contribution to the above options and mathematically option C turns out to be better as the amount of coverage I get from employer vs the per paycheck premium/ deduction I have to pay is better that B and D.

Is there a way where I can enroll in my wife's plan and at the same time qualify to make contributions to HSA to highest level possible. 

Almost all the time we will use the nearby hospital (hence my wife's insurance) so answer potentially is as simple as why even bother about HSA and coverage that my (husband's) employer provides as we'll hopefully not use that. But I am just trying to make sure I am able to put some money aside in HSA for future needs 

[Opus 17]

You are only eligible to contribute to an HSA if you are covered by an HSA-eligible insurance plan.  You can be covered by more than one plan (your own individual plan and a spouse's plan) but they both have to be HSA-eligible.  If you have any "other coverage" that is not HSA eligible, you can't make contributions.  "Other coverage" also includes an FSA account attached to your spouse's plan, because even if your spouse's plan only covers the spouse+child, the FSA by law covers the owner, spouse and dependents, so your spouse's FSA will disqualify you even if you are not a covered person on the main plan. 

[puneetswami9]

I see. I can remove myself from my wife’s plan and that way I am not dependent on her coverage and can I then continue with my own HSA eligible account?

Can child be on both plans ( be on my wife’s low deductible plan and I can add her to my HSA plan to be able to contribute to higher limit with Option C per my OP)

[Opus 17]

@puneetswami9 

Your child can be covered on both plans, that doesn’t affect you.  Your spouse needs a “self+child” plan so that you are not a covered person.  

[Mike9241]

@puneetswami9  if your child is covered by multiple plans there's usually a provision  - called coordination of benefits - which may result in lower coverage on a claim than if only covered by one policy. 

[Opus 17]

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@Mike9241 wrote:

@puneetswami9  if your child is covered by multiple plans there's usually a provision  - called coordination of benefits - which may result in lower coverage on a claim than if only covered by one policy. 

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The idea is that one plan is primary on the child, and all claims must go to that plan first.  Then, any unpaid amounts may be submitted to the second plan, which might or might not cover anything depending on the rules of the plan.  I've never had coordinated coverage result in less benefit, but sometimes the second plan never kicks in.  You should think about which plan should be primary on the child, based on coverage limits, in-network providers, and so on. 

[puneetswami9]

Thanks.

Just so I understand correctly, we can do the following

My wife : herself + child 

in her low deductible plan

Myself: me + child

HSA eligible plan and can contribute to family limits.

Making sure I am not on my wife’s plans and/or essentially  any other plan that is not an HSA eligibile plan
That should work. Correct?

[Opus 17]

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@puneetswami9 wrote:

Thanks.

Just so I understand correctly, we can do the following

My wife : herself + child 

in her low deductible plan

Myself: me + child

HSA eligible plan and can contribute to family limits.

Making sure I am not on my wife’s plans and/or essentially  any other plan that is not an HSA eligibile plan
That should work. Correct?

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Right, but your wife can't take an FSA even if the option is available.

She could have a "limited purpose" FSA, which is a special FSA that only covers thing that are not covered by normal insurance, like vision care and orthodontics.  A limited purpose FSA does not count as disqualifying coverage for you, but a regular FSA would disqualify you.

There's more information here.

https://www.irs.gov/forms-pubs/about-publication-969

[puneetswami9]

Thanks a lot. After weighing the insurance coverage vs the tax benefit I would have gained with HSA account. I finally dedicated to go ahead with being on my wife’s low deductible plan and I am no longer taking coverage from my employer asI only wanted to take their HSA eligible plan but won’t be eligible now.

[Opus 17]

@puneetswami9 

The question of whether to take a low premium plan that would have a higher out-of-pocket deductible in case of significant medical expense, or a high premium plan that would have low additional cost in case of a medical expense, is very individualized to your specific circumstances and medical needs. Good luck.