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IRS Announces 2015 Amounts for HSAs, HDHPs, and Out-of-Pocket Limits; Creates Another Trap for HDHP Sponsors

On April 23, the IRS issued Revenue Procedure 2014-30, announcing the 2015 inflation-adjusted dollar limitations applicable to health savings accounts (“HSAs”) and qualifying high deductible health plans (“HDHPs”).

The maximum HSA contribution for an individual with self-only coverage under an HDHP will increase to $3,350 – up from $3,300 in 2014. The maximum HSA contribution for an individual with family HDHP coverage will be $6,650 – up from $6,550 in 2014. The “catch-up contribution” limit, for individuals who will attain age 55 by the end of the year, will remain at $1,000.

To qualify as an HDHP, a plan must specify both a minimum annual deductible and a maximum annual out-of-pocket expense amount, with both amounts based on whether the coverage is self-only or family. These amounts have also been adjusted for inflation.

For self-only coverage, the annual deductible must be no less than $1,300 – up from $1,250 in 2014. For family coverage, the annual deductible must be no less than $2,600 – up from $2,500 in 2014. The annual out-of-pocket expenses (deductibles, co-payments, and other amounts – but not premiums) for 2015 may not exceed $6,450 for self-only coverage or $12,900 for family coverage.

Note that these 2015 maximum out-of-pocket expense amounts are not the same as the maximum out-of-pocket limits for “essential health benefits” provided under non-grandfathered health insurance plans and policies. Although these two out-of-pocket maximums were identical for 2014, that will not be true in 2015. This is because the out-of-pocket limits for essential health benefits are adjusted using the “premium adjustment percentage” calculated by the Department of Health and Human Services (“HHS”), whereas the maximum HDHP out-of-pocket expense is adjusted on the basis of the Consumer Price Index (“CPI”).

Using the premium adjustment percentage, HHS has announced that the maximum out-of-pocket limits for essential health benefits will increase in 2015 to $6,600 for self-only coverage or $13,200 for family coverage. These amounts are higher than the CPI-adjusted out-of-pocket limits for HDHPs ($6,450 for self-only coverage and $12,900 for family coverage). A plan with out-of-pocket limits that are higher than the HDHP-permitted amounts will not qualify as an HDHP, and can therefore not be paired with an HSA. And because the premium adjustment percentage is tied to rapidly increasing health insurance premiums (versus the CPI items), the gap between the two out-of-pocket limits is likely to widen each year.

From a practical standpoint, sponsors of HSA arrangements and/or HDHPs will want to incorporate these new dollar amounts into their 2015 open enrollment materials. Sponsors of HDHPs will also need to ensure that those plans’ inflation-adjustment language for maximum out-of-pocket expenses, if any, is drafted in terms of adjustments to the CPI. This way, those plans’ out-of-pocket limits will not inadvertently exceed the allowable amounts, thereby causing the plans to lose their qualified HDHP status and the corresponding ability to be paired with an HSA.

Additionally, sponsors of non-HDHP, non-grandfathered health plans that want to take full advantage of the maximum out-of-pocket limits for essential health benefits – for 2015 and beyond – will want to ensure that those plans incorporate the correct HHS premium adjustment percentage language with respect to the maximum out-of-pocket limits for essential health benefits. Those sponsors will also want to update their 2015 open enrollment materials to reflect the appropriate out-of-pocket limits.

Finally, in a related development, Congress has provided welcome relief for sponsors of small, non-grandfathered group health plans. Legislation signed by the President on April 1 totally eliminates the caps on deductibles under such plans. (There were already no deductible caps in the large-group market.) As discussed in our April 2013 article, these small-plan deductible caps were set at $2,000 for individual coverage and $4,000 for family coverage. Now, sponsors of non-grandfathered, small-group health plans are free to implement plans with higher deductibles – so long as the plans satisfy the overall out-of-pocket maximums for essential health benefits.