{"id":231767,"date":"2025-05-09T01:00:10","date_gmt":"2025-05-09T01:00:10","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/finance\/combining-an-hdhp-with-a-regular-health-insurance-plan\/"},"modified":"2025-05-09T01:00:10","modified_gmt":"2025-05-09T01:00:10","slug":"combining-an-hdhp-with-a-regular-health-insurance-plan","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=231767","title":{"rendered":"Combining An HDHP With A Regular Health Insurance Plan"},"content":{"rendered":"


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I recently discovered something about my high-deductible health plan that I never realized. Despite only having a high-deductible health plan for myself, it turns out that all of the qualified medical expenses that my family incurs are eligible for reimbursement from my health savings account, even though none of my family members are on my health plan. This is a fairly big deal for me, as it adds up to much more potentially triple-tax advantaged savings for me that I didn\u2019t realize I had.<\/p>\n

A Brief Primer on HDHPs and HSAs<\/h2>\n

As a bit of background, a high-deductible health plan (referred to as an HDHP) is a type of health insurance plan that, as the name suggests, comes with a high deductible. HDHPs are legally defined health insurance plans that must meet certain requirements to have the HDHP label, so if you have an HDHP, it will be labeled as such and you\u2019ll know that it\u2019s an HDHP.<\/p>\n

The main reason you might want an HDHP is because it comes with lower monthly premiums. If you\u2019re generally healthy and not a heavy user of health insurance, it can make sense to have an HDHP to save on the monthly premiums. This is exactly why I\u2019ve always opted for an HDHP whenever I have the opportunity.<\/p>\n

The second reason to have an HDHP is that it gives you access to a Health Savings Account (HSA). An HSA is a special type of account that you\u2019re allowed to contribute to if you have an HDHP. The money you contribute to an HSA goes in pre-tax, grows tax-free within the HSA, and can be withdrawn tax-free so long as the money is used for \u201cqualified medical expenses<\/a>.\u201d<\/p>\n

The secret with an HSA is that you can invest the money that you contribute and you don\u2019t have to withdraw your contributions for qualified medical expenses at the same time you incur those expenses. That means you can invest your HSA contributions and allow that money to grow over time, then withdraw your qualified medical expenses later tax-free. After age 65, any funds that remain in your HSA and aren\u2019t used for qualified medical expenses can be withdrawn similar to a traditional IRA without any penalty and for any reason (i.e. your funds are contributed pre-tax, grows tax-free, and you pay taxes when you withdraw the money).<\/p>\n

The big advantage of an HSA is that it gives you an extra tax-advantaged account (and for most people, taking advantage of all the tax-advantaged accounts you can is ideal). In addition, not only is an HSA tax-advantaged, but it\u2019s also one of the only triple-tax-advantaged accounts<\/a> out there, where it\u2019s possible to contribute money pre-tax, allow your money to grow tax-free, and withdraw your money tax-free. This is why for many people, having an HDHP and having access to an HSA can be very beneficial.<\/p>\n

My HDHP and HSA Situation<\/h2>\n

Because my wife and I both have our own businesses, we both bear the entire cost of our health insurance. My wife has a \u201cregular\u201d health insurance plan that she gets through her work. This plan includes her and both of our kids. From a health insurance perspective, it makes sense for my wife and our kids to go on her health insurance since they use health insurance a lot more than I do. This is especially true of our kids \u2013 it turns out kids are not cheap and they are always getting sick.<\/p>\n

Meanwhile, I have an HDHP that I get through the state health insurance exchange. My premiums are lower because of this plan, but I also pay higher deductibles whenever I need to go see a doctor. However, preventative care is still fully covered and I haven\u2019t had to go to the doctor for much else in years, so my healthcare expenses over the past several years have been low. I keep track of all my healthcare expenses and over the past decade, I\u2019ve spent less than $1,000 on healthcare expenses, with the majority of those costs coming from eye exams and buying new eyeglasses.<\/p>\n

Importantly, since I have an HDHP, this gives me access to an HSA and allows me to contribute up to the yearly individual HSA limit (this amount changes each year, so you\u2019ll need to search to see what the current limits are). My HDHP is an individual plan that only covers me, so I\u2019m limited to the individual HSA limits, rather than the family limits<\/p>\n

So, to recap, my wife and kids are on her \u201cregular\u201d health insurance plan. I have my own HDHP which gives me an HSA that allows me to contribute up to the yearly individual limit.<\/p>\n

HSA Expenses Count For Spouses and Dependents<\/h2>\n

For years, I assumed that since I was the only one with an HDHP, the only qualified medical expenses I could count for my HSA were my personal healthcare expenses. Since I don\u2019t spend much on healthcare, it meant I didn\u2019t have a lot of qualified health expenses that I could use for my HSA.<\/p>\n

However, while digging around randomly, I learned that an HSA can be used for qualified medical expenses for spouses and dependents, even if they aren\u2019t on your health insurance plan and don\u2019t have an HDHP of their own. Specifically, the official IRS guidance states the following:<\/p>\n

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Qualified medical expenses are those incurred by the following persons.<\/span><\/p>\n<\/blockquote>\n

You\u2019ll notice that there isn\u2019t any requirement that your spouse or dependents (i.e. children) are on your health plan \u2013 all that matters is that they are your spouse or a dependent. This came as a big surprise to me but is immensely useful for my purposes. My wife and kids both have much more health expenses than I do and considering my kids have many more years of being dependents and will undoubtedly rack up more medical bills, I\u2019m essentially going to be able to pay for all of that with tax-free money.<\/p>\n

One issue is that you need records to back up any withdrawals for qualified medical expenses and I hadn\u2019t been keeping track of their medical expenses over the years. Fortunately, our medical provider keeps track of all payments we\u2019ve ever made, so I was able to dig through all of their records and get everything recorded into a spreadsheet.<\/p>\n

In the end, we\u2019re looking at thousands of dollars in qualified medical expenses that I did not previously anticipate.<\/p>\n

Final Thoughts \u2013 The Best Of Both Worlds?<\/h2>\n

Looking at it, having an HDHP for myself plus a regular health insurance plan for my wife and kids might give us the best of all worlds. They get a more robust health insurance that covers the higher healthcare costs they typically incur. Meanwhile, I have a lower-cost health insurance that is a better fit for how I use healthcare.<\/p>\n

At the same time, having an HDHP means I get access to an HSA, which I can use as an extra retirement account and is one of the few ways to get triple-tax-advantaged savings. And now that I know their health expenses are qualified medical expenses, I\u2019ll be in a position where much of the money I withdraw from my HSA in the future can be withdrawn tax-free.<\/p>\n

For those of you looking for an HSA, I recommend Fidelity (here\u2019s a post I wrote about when I switched my HSA over to Fidelity<\/a>). It\u2019s free and lets you invest in good low-cost index funds, so I can highly recommend it.<\/p>\n

Also, your situation may be very different from mine, so be sure to do some research and make sure that an HDHP makes sense for your situation.<\/p>\n

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This post may contain affiliate links. Financial Panther has partnered with AwardWallet and CardRatings for our coverage of credit card products. Financial Panther, AwardWallet, and CardRatings may receive a commission from card issuers. Some or all of the card offers that appear on the website are from advertisers. Compensation may impact on how and where card products appear on the site. The site does not include all card companies, or all available card offers. Opinions, reviews, analyses & recommendations are the author\u2019s alone, and have not been reviewed, endorsed or approved by any of these entities.<\/em><\/p>\n

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