Can You Pay Insurance Premiums With HSA Funds?

You can use HSA funds to pay insurance premiums in only four situations: long-term care insurance up to age-based dollar caps, COBRA continuation coverage, health coverage while you’re collecting unemployment benefits, and Medicare premiums once you turn 65. Paying insurance premiums with HSA funds outside those four categories turns the withdrawal into taxable income, and if you’re under 65 the IRS adds a 20% penalty on top.

The Four Premium Types HSA Funds Can Cover

HSAs are built to pay out-of-pocket medical costs, not ongoing insurance bills. The exceptions listed in IRS Publication 969 are narrow, and each has its own conditions.

Long-Term Care Insurance

Premiums on a tax-qualified long-term care policy count as a qualified HSA expense, but only up to an annual cap based on your age at year-end. The caps are indexed for inflation. For 2026:

Age 40 or under: $500
Age 41 to 50: $930
Age 51 to 60: $1,860
Age 61 to 70: $4,960
Age 71 or older: $6,200

Anything you pay above your cap from the HSA becomes a non-qualified distribution. The caps are per person, so a spouse with their own policy gets a separate limit based on their own age.¹

COBRA Continuation Coverage

If you lose employer coverage and elect COBRA, those premiums qualify. This is one of the more practical uses of HSA money because COBRA runs expensive — you’re paying the full cost your employer used to subsidize. HSA funds can also cover COBRA premiums for your spouse or dependents.¹

Health Coverage While Receiving Unemployment

While you’re collecting unemployment compensation under any federal or state program, health insurance premiums you pay during that period are HSA-eligible. This isn’t limited to COBRA; any health coverage qualifies, and premiums for a spouse or dependent count too. Once your unemployment benefits stop, the exception stops with them.¹

Medicare Premiums After Age 65

Starting at age 65, HSA funds can pay Medicare Part A, Part B, Part D, and Medicare Advantage (Part C) premiums. Part B alone runs several hundred dollars a month for many retirees, so this is one of the strongest reasons to let an HSA balance grow through your working years.¹

One important carve-out: Medicare Supplement policies (Medigap) do not qualify. If you carry a Medigap plan alongside Original Medicare, those premiums have to come from somewhere other than your HSA.

Premiums That Do Not Qualify

Everything outside those four categories is off-limits. Some come up often enough to name:

Medigap (Medicare Supplement) premiums, explicitly excluded even after 65.
ACA Marketplace plans purchased through healthcare.gov or a state exchange, unless you also fall under one of the four exceptions (for example, receiving unemployment benefits).
Employer group health premiums deducted from your paycheck.
Healthcare sharing ministry monthly shares, which the IRS does not treat as insurance.
Standalone dental and vision plan premiums. The treatment costs themselves qualify as medical expenses; the premiums do not.

If a premium doesn’t fit one of the four categories in Publication 969, HSA money can’t pay it tax-free.¹

Medicare Timing Rules That Catch People Off Guard

The Medicare piece produces more expensive mistakes than any other part of these rules.

Enrollment Stops New Contributions

Starting the first month you’re enrolled in any part of Medicare, your HSA contribution limit becomes zero. You can still spend existing balances on qualified expenses, including the Medicare premiums above, but no new contributions. If you’re working past 65 on an employer HDHP and want to keep contributing, you have to hold off on Medicare enrollment.¹

The Retroactive Part A Trap

When you apply for Medicare Part A after 65, coverage can be backdated by up to six months. That backdating wipes out your HSA eligibility for those months. Any contributions made during the retroactive window become excess contributions, which carry a 6% excise tax each year they stay in the account. To fix it, pull the excess plus attributable earnings before your tax deadline; the earnings you withdraw are taxable.¹

If you’re planning to work past 65 and contribute to your HSA, coordinate your Medicare enrollment date carefully and count backward six months when you finally sign up.

Paying a Spouse’s Medicare Premiums

Your HSA can pay Medicare premiums for a spouse, but only if you (the account holder) are also 65 or older. If you’re 62 and your spouse is 66, their Medicare premiums are not a qualified HSA expense from your account. Age-gapped couples get burned by this one.¹

What Happens If You Pay an Ineligible Premium

Pay a non-qualifying premium from your HSA and the distribution becomes ordinary income on your return. If you’re under 65, the IRS tacks on a 20% additional tax. That’s double the early withdrawal penalty on IRAs. After 65, the 20% penalty falls away, but income tax on the distribution still applies.¹

Your HSA custodian will not stop you. Banks and brokerages that hold HSAs report every distribution on Form 1099-SA, but they do no gatekeeping on what the money buys. Sorting eligible from ineligible is on you, and the IRS reconciles it through your Form 8889 or, later, through an audit.

Fixing a Mistaken Distribution

If you accidentally paid an ineligible premium and catch it in time, you can return the money. The IRS permits repayment of mistaken distributions caused by reasonable cause, and the return must land in the account no later than the due date of your return (without extensions) for the first year you knew or should have known about the error.²

Repay within that window and the distribution stays out of your gross income, the 20% additional tax does not apply, and the repayment is not treated as an excess contribution. Custodians are not required to accept the return, but most will if you explain the situation, and they can issue a corrected 1099-SA if one already went out.

Records You Need to Keep

The IRS wants you to be able to show three things for any distribution you treat as qualified: the money went to qualified medical expenses, those expenses were not reimbursed from another source, and they were not deducted on any tax return. You don’t submit the documentation with your return, but you need it if the IRS comes asking. For premium payments, keep the insurer’s billing statements, proof of payment, and evidence of your eligibility for the exception you’re relying on — a COBRA election notice, an unemployment determination, or your Medicare enrollment confirmation.¹

1
Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
2
Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA