Haris Ashley
Health Savings Accounts (HSAs) are a popular way to save for medical expenses, but are those in the military eligible for one with Tricare Reserve Insurance? Tricare is a health insurance plan for those serving in the military and their families. Unfortunately, it seems that if you are eligible for Tricare, you cannot have an HSA, even if you don't use it and have another insurance plan. This is because Tricare does not meet the criteria for Other Health Insurance and is not a High-Deductible Health Plan (HDHP), which is required to be eligible for an HSA. However, there are other options for those serving in the military, such as Flexible Spending Accounts (FSAs), which can offer tax breaks on medical services not covered by Tricare.
| Characteristics | Values |
|---|---|
| Eligibility for Tricare Reserve Insurance | Required to take a federal health insurance policy on the marketplace |
| Eligibility for HSA | Must be covered under an HDHP and have no other health coverage |
| Tricare as a secondary coverage | Disqualifies the user from HSA |
| Tricare Reserve Insurance and Federal Employee | Eligible for TRS |
| Tricare | Not an HDHP |
| Flexible Spending Account (FSA) | Can be used to pay for medical services not covered by Tricare |
| Annual contribution limit for HSA | $3,600 for individuals and $7,200 for families |
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What You'll Learn
Tricare is not an HDHP
To be eligible for an HSA, you must be enrolled in a High Deductible Health Plan (HDHP) and have no other insurance coverage apart from what is allowed under Other Health Coverage as defined by the IRS. You also cannot be enrolled in Medicare or be claimed as a dependent on someone else's tax return.
While Tricare Reserve Insurance members are not eligible for an HSA, they are eligible for a Flexible Spending Account (FSA). An FSA offers a tax break on medical services not covered by Tricare. This means that your employer puts pre-tax dollars into an account, and you get reimbursed as you spend.
If you are enrolled in an HDHP and Tricare and are concerned about out-of-pocket costs, you can sign up for a Tricare supplemental policy. Tricare supplements are available through various military organizations, including the Military Officers Association of America (MOAA).
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Tricare Reserve Insurance members are eligible for Flexible Spending Accounts (FSAs)
A Flexible Spending Account is different from a Health Savings Account (HSA) in that the money in an FSA must be spent within a year, whereas an HSA lets you keep the contributions and growth. An HSA also requires you to be covered under an HDHP and have no other health coverage, which is not possible if you are eligible for Tricare.
Tricare Reserve Insurance members are eligible for FSAs because they are considered to have other health coverage. This means that even if you are a reservist with a federal health insurance policy, you can still set up an FSA. The IRS determines what expenses are considered eligible for FSAs, and you can use the funds to pay for deductibles, copayments, and health products that Tricare doesn't cover, such as wellness care.
It is important to note that while FSAs can be used to pay for Tricare plans, the funds cannot be used to pay for Tricare Reserve plans specifically. However, FSAs can still be a good option for Tricare Reserve Insurance members as they provide tax breaks on medical services not covered by Tricare Reserve Insurance.
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FSAs offer tax breaks on medical services not covered by Tricare
If you are eligible for Tricare, you cannot have a Health Savings Account (HSA). This is because Tricare does not qualify as a "high-deductible health plan", and does not meet the required criteria for "Other Health Insurance". This means that service members cannot establish HSA accounts while covered under Tricare. Even if a military spouse had a high-deductible plan through their work, having Tricare as a secondary coverage would disqualify them from having an HSA.
However, service members can set up a Flexible Spending Account (FSA), which offers a tax break on medical services not covered by Tricare. An FSA is a special account that allows you to put money aside pre-tax to pay for certain out-of-pocket healthcare costs. This includes the costs of medical equipment, supplies, and diagnostic devices. Essentially, your employer puts pre-tax dollars into an account, and then you get reimbursed as you spend them. You can also use FSAs to pay for Tricare plans.
To be eligible for an HSA, you must be covered under an HDHP, have no other health coverage (except what is permitted under Other Health Coverage, as defined by the IRS), cannot be enrolled in Medicare, and cannot be claimed as a dependent on another individual's previous year's tax return.
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HSA eligibility requirements
To be eligible for a Health Savings Account (HSA), you must meet the following requirements:
Be covered by a qualified high-deductible health plan (HDHP)
The first requirement for an individual to be HSA-eligible is that they be covered by a high-deductible health plan (HDHP). An HDHP has a higher deductible than typical health plans and must meet certain standards. The minimum deductible and maximum out-of-pocket limit to qualify as an HSA-compatible HDHP are adjusted annually based on inflation.
No disqualifying coverage
In addition to HDHP coverage, HSA-eligible individuals cannot have any other health coverage that is not HSA-compatible. Generally, any type of health coverage that covers non-preventative medical expenses before satisfying the statutory minimum HDHP deductible is disqualifying coverage. This includes secondary insurance that pays for non-preventative care before you meet your deductible. However, dental, vision, and limited-purpose Flexible Spending Accounts (FSAs) are allowed.
Not enrolled in Medicare or Medicaid
You cannot be enrolled in Medicare (Part A or B) or Medicaid and be eligible for an HSA.
Not claimed as a dependent
If someone else claims you as a dependent on their tax return, you are not eligible for an HSA.
No disqualifying medical savings accounts
Participation in an FSA or Health Reimbursement Arrangement (HRA) may disqualify you from contributing to an HSA unless you have a limited-purpose FSA that covers only dental and vision expenses.
It is important to note that even if you meet all the above requirements, TRICARE is not an HDHP and does not meet the criteria for Other Health Insurance. Therefore, servicemembers cannot establish HSA accounts while covered under TRICARE, even if they have an HDHP with a non-military employer.
Starting January 1, 2026, new federal rules under the One Big Beautiful Bill (OBBB) will expand HSA eligibility to include many ACA Bronze and Catastrophic marketplace plans, even if they don't meet the usual requirements.
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HSA funds can be used for retirement purposes
Health Savings Accounts (HSAs) are a great way to save for retirement, offering triple tax savings. You can contribute pre-tax dollars, pay no taxes on the interest accrued, and withdraw the money tax-free for qualified medical expenses. This makes HSAs one of the most tax-efficient savings vehicles available.
However, it's important to note that you cannot establish an HSA while covered under certain types of insurance, such as TRICARE, as it does not meet the criteria for a High-Deductible Health Plan (HDHP). To be eligible for an HSA, you must be covered under an HDHP and have no other health coverage, except in specific circumstances defined by the IRS.
If you are eligible for an HSA, it can be a powerful tool for retirement planning. You can use the funds to pay for various medical expenses, including deductibles, copays, and coinsurance. HSAs can also be used for non-Medicare-covered expenses, such as dental, vision, and hearing care. Additionally, HSA funds can cover long-term care costs, such as in-home care or nursing home expenses, which are often not covered by Medicare.
It's important to plan ahead when using HSA funds for retirement. Generally, you cannot use HSA funds to pay health insurance premiums, although there are some exceptions, such as paying for health care coverage under COBRA or while receiving unemployment benefits. Once you turn 65, the restrictions on HSA funds are lifted, and you can use the money for anything you want without penalty, although non-medical expenses will be taxed as regular income.
In summary, while HSAs offer significant benefits for retirement savings, it's essential to understand the eligibility requirements and restrictions on fund usage to maximize their effectiveness as part of your financial strategy.
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Frequently asked questions
No. If you are enrolled in a Tricare plan, you are not eligible for an HSA.
You still cannot have an HSA because Tricare is not an HDHP and does not meet the required criteria for Other Health Insurance.
Tricare as a secondary coverage would disqualify you from having an HSA.
You could be eligible for a Flexible Spending Account (FSA). It functions like an HSA but can be applied to other medical/dependent care expenses.
