Questions on HSA health policies thru ACA

[Tom52]

A little background, my health insurance thru my former employer ends Nov 30, 2014. I was planning on paying cobra insurance for the month of Dec 2014 and then switching to an ACA plan starting Jan 1, 2015. I resided in Illinois for the job and moved to Iowa just two months ago.

I started an online application yesterday, the first day of open enrollment. I could not complete the application, most likely because my information does not match due to the change of address. I called the number listed to talk to a helper.

The helper said that if I could complete an application on that date, Nov 15 I would be eligible to get ACA insurance for the month starting Dec. 1, 2014 because of the qualifying job loss during 2014. I was not aware I could do this and still qualify for a one month subsidy because my 2014 AGI will be way over 400% PL. They stated that if I send proof of loss of income to the Health Insurance Marketplace I would still be entitled to a one month subsidy. The helper stepped me thru the process to file an application, but then I also had to pick a policy then and there.

I had at least reviewed the policies in the days preceding Nov. 15 but I was not yet knowledgeable enough to pick a policy that best fit my needs. I hastily chose an HSA policy because it at least has local Doctors in it.

The helper gave me a phone number to contact the insurer to pay for the chosen policy. I pointed out to the helper that it was Saturday and that the insurer was probably closed. (which they were). So I am hopeful that I can contact them on Monday to pay for the one month policy for Dec 2014.

Now, after the fact I have some questions.
1. Since my wife and I don't have any employment income, can we still open and HSA?
2. Assuming we can start an HSA, will any contributions we make allow us to reduce our MAGI for 2015?
3. If contributions to HSA would reduce our 2015 MAGI, should we have then lowered the estimated income we used to determine our subsidy? For example we used an estimated yearly income of $33,000, which should give us a subsidy of approx. $1,124.00. However, if contributions of say $6,000 into an HSA would lower our MAGI to $27,000 our subsidy would likely be greater. I am confused how this works.

I really need to get a handle on this before I apply for ACA for 2015. I understand I have till Dec. 15 to complete the application for insurance to begin on Jan 1, 2015

 

[Animorph]

Now, after the fact I have some questions.
1. Since my wife and I don't have any employment income, can we still open and HSA?
2. Assuming we can start an HSA, will any contributions we make allow us to reduce our MAGI for 2015?
3. If contributions to HSA would reduce our 2015 MAGI, should be have then lowered the estimated income we used to determine our subsidy? For example we used an estimated yearly income of $33,000, which should give us a subsidy of approx. $1,124.00. However, if contributions of say $6,000 into an HSA would lower our MAGI to $25,000 our subsidy would likely be greater. I am confused how this works.

I really need to get a handle on this before I apply for ACA for 2015. I understand I have till Dec. 15 to complete the application for insurance to begin on Jan 1, 2015

The HSA depends only on your health insurance, not your employment. No problem funding and using your HSA after retirement.

Also, if you are covered on 12/1/2014 and maintain HSA eligible coverage throughout 2015, you can make a full (yearly maximum) 2014 HSA contribution. We started on October 1.

IRS publication:
Publication 969 (2013), Health Savings Accounts and Other Tax-Favored Health Plans

"Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers).

If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you.
"

This is also about the only benefit of buying an HSA plan late in the year, since your deductible is not pro-rated and will reset in January. You'll pretty much be paying for everything.

I would think HSA contributions would not decrease your MAGI for ACA purposes, but I don't know.

 

[rbmrtn]

1. HSA is dependent on the insurer providing an HSA eligible policy. Not dependent on employment.

2. HSA contributions are detuctible and do not count towards MAGI for ACA. Here's alink for MAGI under ACA rules

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

3. You can reduce you estimated or it gets reconciled when you file taxes. One generates advance payments the other a refund.

 

[Buckeye]

If OP makes a 2014 contribution and does NOT purchase an HSA qualified policy for 2015, I think there will be a problem. OP can contribute the full amount for 2014 but only if OP purchases an HSA qualified policy for 2015.

The good news is OP can make a 2014 contribution as late as April 2015 so OP will have already purchased a 2015 policy and will know, without a doubt, whether it is HSA qualified.

 

[Tom52]

Thank you all for the information. The policy I chose is HSA qualified. So it sounds like if I sign up for a HSA qualified policy for 2015 I can make a tax deductible contribution for 2014 as late as April 2015 and then another tax deductible HSA contribution for 2015.


Have I got this right that I can make a maximum 2014 HSA contribution so long as I am covered effective Dec. 1, 2014? The maximum I can contribute for 2014 is $7,550 for a family, (wife and I are both over 55)


A couple of additional questions..
1. Do we have the choice where the HSA account is to be opened, such as thru Vanguard? Or is the HSA account set up thru the insurance provider?
2. With only DW and I do we open up a family HSA account or do we each have to have separate HSA accounts?
3. Is it correct to assume that you can have a different HSA policy, starting 2015, and even from a different carrier and still maintain the tax free status of HSA contributions? In other words, is it correct to assume you are in no way locked into one insurance carrier?

 

[Buckeye]

Thank you all for the information. The policy I chose is HSA qualified. So it sounds like if I sign up for a HSA qualified policy for 2015 I can make a tax deductible contribution for 2014 as late as April 2015 and then another tax deductible HSA contribution for 2015.


Have I got this right that I can make a maximum 2014 HSA contribution so long as I am covered effective Dec. 1, 2014? The maximum I can contribute for 2014 is $7,550 for a family, (wife and I are both over 55)


A couple of additional questions..
1. Do we have the choice where the HSA account is to be opened, such as thru Vanguard? Or is the HSA account set up thru the insurance provider?
2. With only DW and I do we open up a family HSA account or do we each have to have separate HSA accounts?
3. Is it correct to assume that you can have a different HSA policy, starting 2015, and even from a different carrier and still maintain the tax free status of HSA contributions? In other words, is it correct to assume you are in no way locked into one insurance carrier?

Here's what I know:
1. Yes, you have a choice of where you have your HSA. I use Health Equity. Others will have suggestions for you. Watch the fees.
2. As far as I know, you can fund only one HSA per year. I don't really know if you can fund yours one year and then open one for DW the following year. You can pay expenses for both of you out of one IRA.
3. The HSA account is disconnected from the insurance company. You are not locked into an HSA/insurance company combination.

If you are a vet, there are other complications if you receive healthcare at the VA.