Compliance Q&A: HSA Eligibility with Embedded Deductibles & Special Enrollment Rights After Childbirth

9.4.25 |  HSA ELIGIBILITY WITH EMBEDDED DEDUCTIBLE

Q. Please explain how an embedded deductible affects eligibility to participate in an HSA.

A. To be HSA eligible, the employee must only be enrolled a qualified high deductible health plan. For 2025, a qualified high deductible health plan requires a minimum deductible of $1,650 for single coverage and $3,300 for family coverage. If the medical plan provides benefits (other than preventative care) prior to satisfying these deductibles, the plan is not a qualifying high deductible health plan and the employee cannot contribute to an HSA.

An embedded deductible refers to a single person deductible embedded within a family plan. For example, if the family plan has a $3,300 deductible but an embedded deductible of $2,000 per person, this plan will pay benefits if one family member has $2,000 of expenses even though the family may not have satisfied the $3,300 family deductible. This type of plan design would NOT be a qualified high deductible plan because the plan would be paying benefits before satisfying the family deductible of $3,300. To be a qualifying high deductible health plan, the embedded deductible must be at least the same amount as the minimum family deductible.

For example, assume a family plan with a $5,000 deductible, but an embedded deductible of $3,300. This means the family must incur $5,000 of expenses before the plan pays anything. But if one family member has $3,300 in expenses, that family member’s bills over $3,300 will be covered. This plan design is a qualified high deductible health plan because the embedded deductible is at least as high as the minimum family high deductible ($3,300 in 2025).


9.18.25 |  QUALIFYING LIFE EVENT

Q. The birth of a child is a qualifying life event, allowing an employee to change plans mid-year. Can an employee still change plans if they don’t add the child to the medical plan?

A. The birth of a child is not only a qualifying life event, but it is also HIPAA special enrollment event. This means the employee has the right to change benefit options regardless of whether the employee adds the new child to the medical plan.

Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.