Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
CatDude
Level 2

Medical Sharing Costs Count as High Deductible for Health Savings Accounts?

I am a single employee of a S corp, as well as the President, and I do not have medical insurance, so I use Christian Health Ministries (Medical Sharing) as my MedSharance provider.  I want to contribute to my already established Health Savings Account, but unsure if the restrictions have changed on what qualifications I need to have to make an annual deposit.   In the past, before Obamacare, you had to have a high deductible medical insurance account (don't know why) in order to donate to your own Health Savings Account.   Please advise on the status of the HSA requirements.   Thanks.

1 Best answer

Accepted Solutions
NCperson
Level 15

Medical Sharing Costs Count as High Deductible for Health Savings Accounts?

here are the qualifications :

 

Qualifying for an HSA Contribution
To be an eligible individual and qualify for an HSA contribution, you must meet the following requirements.
• You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
• You have no other health coverage except what is permitted under Other health coverage, later.
• You aren’t enrolled in Medicare.

 

see page 4 specifically

 

https://www.irs.gov/pub/irs-pdf/p969.pdf

 

 

High deductible health plan (HDHP). An HDHP has:
• A higher annual deductible than typical health plans,
and
• A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but don’t include premiums

 

View solution in original post

6 Replies
NCperson
Level 15

Medical Sharing Costs Count as High Deductible for Health Savings Accounts?

here are the qualifications :

 

Qualifying for an HSA Contribution
To be an eligible individual and qualify for an HSA contribution, you must meet the following requirements.
• You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
• You have no other health coverage except what is permitted under Other health coverage, later.
• You aren’t enrolled in Medicare.

 

see page 4 specifically

 

https://www.irs.gov/pub/irs-pdf/p969.pdf

 

 

High deductible health plan (HDHP). An HDHP has:
• A higher annual deductible than typical health plans,
and
• A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but don’t include premiums

 

CatDude
Level 2

Medical Sharing Costs Count as High Deductible for Health Savings Accounts?

Thank you for the info; I'm trying to understand the rationale for limiting who can save for their Health Benefits.

 

Why does the government want to limit the people who can contribute to an HSA?   Just a guess would be helpful.

NCperson
Level 15

Medical Sharing Costs Count as High Deductible for Health Savings Accounts?

@CatDude - a guess:

 

it's not that the government wants to limit who is eligible for the HSA, I think it's just that who can deduct medical expenses is based on a patchwork of laws that passed over time.  

 

1) medical expenses are deductible as an itemized deduction (with limits that exceed 7.5% of income).  In effect those that take the standard deduction may be getting a benefit greater than those medical expenses, so include those medical expenses as deductible as well.

2) Medical premiums are also either deductible as itemized deductions (exclude Medicare) or as a deduction for self-employed or are paid in pre-tax funds from a paycheck

3) FSA accounts is another way to pay medical expenses with pre-tax dollars and was established way before the HSA

4) HSA were establised in 2003 and created another way to pay for expenses with pre-tax dollars and it permits investing those dollars to boot! 

 

So I don't see it as the government wanting to exclude folks from HSAs, but simply the other way around.  Meaning Congress looks for different approaches for the federal government to pay for medical costs over time and based on who is in power and what agendas are set, medical deductibility and ways to pay on a pre-tax basis has expanded over time. 

 

HSA's filled a gap in 2003 and it's simply the way Congress passed the law.

 

just my two cents 

CatDude
Level 2

Medical Sharing Costs Count as High Deductible for Health Savings Accounts?

Thanks.  

I remember when HSAs came about; it was under Bush 2 and he had been toiling with the idea of allowing people to manage their own Social Security accounts and invest a portion in the stock market, bonds, etc.   The idea is that people could invest better than the government.   But, of course, that didn't pass, so the HSA was developed for folks who wanted to save for their old age (not expire each year like the FSAs) and also allow them to invest those funds in the stock market through a manager.   In the past, when I actually paid medical insurance and had a high deductible policy, I created an HSA and maxed out the investment for 3 years, but then when it didn't make sense to pay medical insurance (high premiums / high deductible / out of sight costs), I switched to the Medical Cost Sharing method, with premiums at about $225 per month and typically 100% reimbursement  of my cash-based negotiated costs.  (I recently received a 91% reduction in the cost of an ER visit, down from $21K, simply by paying cash.)   Anyway, I don't believe HSAs should be tax deductible but people should be allowed to invest in them, with tax free earnings; similar to a Roth IRA.       Oh well.

Opus 17
Level 15

Medical Sharing Costs Count as High Deductible for Health Savings Accounts?

Medical sharing arrangements do not make you eligible to contribute to an HSA. They are not considered an HDHP. Part of the reason for this is that with a health sharing arrangement, you are paying someone else’s medical bills, you are not buying insurance that will cover your own bills.

 

As of last year, the IRS was considering regulations that would allow medical sharing arrangements to be counted as qualifying HDHP‘s, but as far as I know, those regulations have not been approved.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

Medical Sharing Costs Count as High Deductible for Health Savings Accounts?

@CatDude 

It doesn’t matter why, the law is written the way it is written.  You would have to go back and find out who was on the committee that wrote the law and ask them what they were thinking.

 

I can speculate for what it’s worth. HMO‘s were supposed to reduce medical costs by covering everything with a low deductible but making you get all your care approved by your PCP. Your PCP was supposed to coordinate your care and prevent you from over-using medical care. But it didn’t work, because the PCP did not actually have an incentive to control your cost, and because everything had the same low co-pay, HMOs actually led to increased use of medical services.  That led to a change in thinking, that maybe high deductible plans were the way to go, because it would make consumers more cost conscious about where they obtain services and what services they obtain. For example, you would go to urgent care for $200 instead of the emergency room for $2000.  The tax free health savings account was part of this scheme to put consumers back in control of their own medical expenses. If consumers built up a medical savings account that could be rolled over from year to year, they would have an incentive to control their costs and keep their medical usage low, but they would also have the ability to pay large expenses when they occurred.  I think this is the main reason that HSA‘s are only allowable for HDHP‘s and not for HMO‘s.

 

Health sharing ministries are an entirely different kettle of fish. Under the current regulatory scheme, a health sharing ministry is not considered insurance of any kind.  In a health sharing ministry, you pay someone else’s medical expenses on the promise that they will pay your expenses if you become sick. To the consumer, it operates the same as insurance, but in the backend it is a very different legal structure.  This is also why you cannot deduct health sharing ministry premiums as an itemized deduction on schedule A.  You are allowed to deduct medical expenses you pay for yourself, your spouse, or your dependents. Since the health sharing ministry is paying the expenses for someone other than yourself or your dependents or your spouse, it’s not a deductible medical expense on schedule A.  As I mentioned above, I believe the IRS was considering regulations to re-classify health sharing ministries as qualifying insurance plans. I am not aware that that regulation was ever finalized. A good place to check on the progress of the proposed regulations is probably the website for the health sharing ministry, since their customers would have great interest in knowing if the regulations changed. 

Anyway, the short answer is that only a qualifying HDHP qualifies for HSA contributions because Congress made it so.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Dynamic AdsDynamic Ads
Privacy Settings
v