EMPLOYEES: Consumer-directed health plans with health savings accounts

November 18, 2022

A consumer-directed health plan (CDHP) is a high-deductible health plan with a health savings account (HSA). CDHPs offer lower monthly premiums, a higher annual deductible, and a higher annual out-of-pocket limit than most medical plans. Kaiser Permanente Washington and Uniform Medical Plan (UMP) offer CDHPs.

The HSA is a tax-exempt account anyone can deposit funds into on your behalf. You can use your HSA to pay for IRS qualified out-of-pocket expenses (like deductibles, copays, and coinsurance), including some expenses and services that your health plan may not cover.

Generally, CDHPs work well for people who:

  • Can meet the eligibility requirements.
  • Prefer a lower monthly premium.
  • Want to save on taxes by contributing to an HSA through pre-tax payroll deductions.
  • Are willing to check which services and supplies are qualified HSA expenses.
  • Can keep track of HSA expenses in case of an IRS audit.

CDHPs can encourage you to make informed decisions about your health care and spend HSA funds wisely. Those who enroll in a CDHP should prepare to invest time and energy in seeking qualified HSA expenses from network providers.

Eligibility

You must meet certain eligibility requirements to enroll in a CDHP with an HSA. If you are not eligible for the HSA and enroll, you may be liable for tax penalties.

To be eligible to enroll in a CDHP, you cannot be enrolled in:

  • Medicare Part A or Part B
  • Medicaid
  • Another comprehensive medical plan
  • VEBA, unless you convert it to a limited-purpose HRA coverage
  • TRICARE
  • Medical flexible spending arrangement (FSA) or Health Reimbursement Arrangement (HRA) Note: You may enroll in a Limited Purpose FSA.

Other exclusions apply. Check the IRS Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans at irs.gov, contact your tax advisor, or call HealthEquity (the HSA administrator) toll-free at 1-877-873-8823 for Kaiser Permanente members and 1-844-351-6853 for UMP members to verify whether you qualify. See the Complete HSA Guidebook for full details.

Contributions

When you enroll in a CDHP with an HSA, your employer will contribute $700.08 per year ($58.34 per month) for enrollment as a single subscriber or $1,400.04 per year ($116.67 per month) for enrollment for you and at least one other family member. You can choose to contribute to your HSA as well.

The maximum HSA contribution from all sources for a single subscriber for 2023 is $3,850 and $7,750 for a family. Employees ages 55 and up can contribute up to $1,000 more per year.

Learn more on the PEBB Program’s Health plans with HSAs webpage.