Q: We have a former servicemember with “service-connected disabilities” who wants to enroll in our high deductible health plan (HDHP). He has questions about his eligibility to contribute to an HSA because he receives free healthcare through the local VA hospital. What are the regulations around a veteran contributing to an HSA in this situation?
A: As you know, in order to contribute to an HSA, an employee must not have any “disqualifying coverage” – i.e., any sort of coverage or account that pays for medical expenses that would otherwise be applied to the employee’s deductible on the HDHP. The question for this employee is whether free medical services obtained through the VA hospital would be considered disqualifying coverage.
Prior to 2016, a veteran who obtained medical care through the VA within the past three months was considered ineligible to contribute to an HSA. Thankfully, this confusing rule was changed effective January 1, 2016. A new law took effect that allows veterans enrolled in a HDHP to make HSA contributions, regardless of when they receive care at the VA, as long as they have a service-connected disability as determined through appropriate military channels. In addition, the law states that veterans may contribute to an HSA even if the care they receive from the VA is unrelated to their service-connected disability.
However, enrollment in TRICARE – the health insurance program offered to uniformed servicemembers, retirees, and their families – is considered disqualifying coverage. An employee could, theoretically, be enrolled in both a HDHP and TRICARE but, in that situation, would not be able to contribute to an HSA.
So, assuming your employee is not enrolled in TRICARE, he should be able to contribute the HSA despite receiving care at the VA.
Benefits Q&A: How Does Medicare Enrollment Impact HSA Contributions?
COVID-Inspired FSA Provisions Offer Increased Flexibility for Employees
Benefits Q&A: Can an Employee Use Another 80 Hours of EPSL?