- Must be covered under a qualified, high deductible health plan
- Must not have coverage by another type of health plan
- Cannot be claimed as a dependent on another person's tax return
- Cannot be enrolled in Medicare
- Contribution limits are set by the IRS. Current 2016 contribution limits are:
- $3,350 for a single person
- $6,750 for a family
- A person age 55 or older may make an additional $1,000 in "catch-up" contributions
What's an HDHP?
A high deductible health plan (HDHP) is an alternative health insurance plan to a traditional HMO or PPO plan. As the name implies, an HDHP has a higher deductible than regular health insurance plans. This may mean more out-of-pocket expenses up front. But once the deductible is met, an HDHP typically pays for 100% of covered medical costs. So in the long run, an HDHP usually means less — often significantly less — out-of-pocket expenses.
But what about that initial high deductible?
That's where combining your HDHP health insurance to a health savings account (HSA) comes in. By accumulating funds in your HSA, you will have the cash needed to cover those costs. What's even better is your HSA is tax exempt.