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Can I Pay My Insurance Premiums with My HSA?

Can I pay insurance premiums with my HSA?One of the many benefits to opening a health savings account is the safety net of having designated monies set aside for health related expenses. Because of the tax-deferred nature of an HSA, there is a personal responsibility in using the account correctly. By this I mean, using the funds only for eligible HSA expenses. But how do you know if you are using your funds in compliance with the IRS?

There is some IRS guidance available. The IRS Publication 502 is used for preparing tax returns and has a long list of what can be considered a write-off. This publication “explains the itemized deductions for medical and dental expenses that you can claim on Schedule A (Form 1040). “ However, the mistake many make is that this IRS Publication is not specific to HSAs. One of the best resources is a knowledgeable HSA administrator, which is a role that American Health Value plays for many nationwide.

The question of “Can I pay my insurance premiums with my HSA?" comes up quite frequently. The IRS Publication 502 says, “You can include in medical expenses insurance premiums you pay for policies that cover medical care.”  One would naturally take that to mean HSA dollars can be used to pay the medical premium.  However, that is true in only a few cases:

  • A portion of age-based  long-term care premiums
     
  • COBRA premiums
    • This includes a spouse or dependent
       
  • Health care coverage while receiving unemployment compensation under federal or state law
    • This includes a spouse or dependent
       
  • Medicare and “other health care coverage” if you are 65 or older
    • Supplemental policies are not included 
    • If the account holder is not 65 or older, Medicare premiums of spouse or dependent are not eligible expenses.
    • The “other health care coverage” would be the employee share of employer-sponsored health insurance, including retiree health insurance

So, if you are trying to decide if you can use your HSA funds to pay for insurance premiums, you now have an educated answer on which to base your decision and you can spend your valuable time doing something that makes you smile!

What makes you smile?

Resources:
 

IRS Publication 502 (Page 2)
IRS Publication 969 (Pages 8 & 9)
IRS Notice 2004-02 (Pages 9 Q & A 27)


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Posted by HSA Admin at 3/13/2013 6:21:00 PM
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