Can I Use HSA to Pay for Marketplace Insurance Premiums?

In almost all cases, no — you cannot use HSA funds to pay premiums for a health plan you bought through HealthCare.gov or a state marketplace. The IRS treats those premiums as a non-qualified expense, so a withdrawal to cover them triggers income tax plus a 20% penalty if you’re under 65.¹ There is one realistic exception: if you’re receiving unemployment compensation, HSA funds can pay any health insurance premium tax-free, including a marketplace plan.

The General Rule on HSAs and Insurance Premiums

HSAs are designed to pay qualified medical expenses like doctor visits, prescriptions, and lab work for people enrolled in a High Deductible Health Plan.² Insurance premiums sit outside that category by default. The IRS allows tax-free HSA payments for premiums only in four specific situations:¹

Health coverage while you’re receiving unemployment compensation
COBRA continuation coverage after leaving a job
Qualified long-term care insurance (subject to annual age-based caps)
Medicare Part A, B, D, Medicare Advantage, and employer-sponsored retiree coverage after you turn 65 (Medigap does not qualify)

Ordinary monthly marketplace premiums are not on that list. If you’re paying for a marketplace plan and none of those exceptions applies to you, HSA money is off-limits for that bill.

What It Costs to Withdraw Anyway

A non-qualified HSA distribution is added to your gross income for the year, which can push you into a higher bracket.³ On top of that, account holders under 65 owe a 20% penalty on the amount.¹

Take a $5,000 marketplace-premium withdrawal that doesn’t qualify. You’d pay income tax on the full $5,000 plus a $1,000 penalty. The 20% penalty disappears once you turn 65, become disabled under the IRS’s definition, or die, but the distribution still counts as taxable income.³

The Unemployment Exception: The One Path That Reaches Marketplace Plans

If you’re receiving unemployment compensation under federal or state law, HSA funds can pay any health insurance premium tax-free during that period, and marketplace coverage is included.¹ This is the exception most likely to apply to someone asking about marketplace premiums, and it’s worth understanding its edges.

The exception is tied to the actual dates you collect benefits. When your unemployment payments stop, so does the exception. A premium payment made after your last unemployment check reverts to the general rule and becomes a non-qualified distribution. To stay compliant, line up your premium payments with the weeks you’re actively drawing benefits, and keep the benefit statements that document those dates.

The exception also reaches your spouse’s and dependents’ premiums during your unemployment period, not just your own coverage.¹ If your whole family is on a marketplace plan while you’re collecting unemployment, HSA funds can cover the household’s premiums.

Why the Other Three Exceptions Don’t Rescue Marketplace Premiums

The remaining three exceptions get asked about often, but none of them turns a marketplace premium into a qualified expense on its own.

COBRA is not marketplace coverage. COBRA is a continuation of your former employer’s group plan. HSA funds can pay COBRA premiums tax-free, and this doesn’t require you to be collecting unemployment.⁴ But if, after a job loss, you drop COBRA and buy a marketplace plan instead, the COBRA exception no longer applies to that new plan. The marketplace premium would only qualify if the unemployment exception is running at the same time.

Long-term care insurance is a separate product. The premium exception here covers qualified long-term care contracts, subject to annual caps that rise with age.¹ It has nothing to do with the medical coverage you buy through the marketplace.

The post-65 rule doesn’t cover marketplace plans. Once you turn 65, HSA funds can pay Medicare Part A, Part B, Part D, Medicare Advantage, and your share of employer-sponsored retiree coverage.¹ Marketplace premiums are not on that list, and Medigap is specifically excluded.⁴ The rule also keys off the account holder’s age, so a younger spouse’s HSA cannot pay an older spouse’s Medicare premiums.

If You Already Paid a Marketplace Premium From Your HSA

Withdrawals made under a reasonable mistake of fact — including believing a premium payment was a qualified expense when it wasn’t — can sometimes be returned to the account.⁵

You have until the tax-filing deadline (April 15 for most people, not counting extensions) of the year after you first knew or should have known about the mistake. If you repay in time and the trustee accepts the money, the distribution is not included in gross income, the 20% penalty does not apply, and the repayment does not count as a new contribution.⁵

Trustees are not required to accept the repayment, so call yours as soon as you spot the error. If they take it back and a Form 1099-SA has already gone out on the original distribution, they’ll issue a corrected form to you and the IRS.

Reporting the Distribution

Every HSA distribution has to be reported on Form 8889, filed with your Form 1040.⁶ You file it in any year you take money out, even if you’d otherwise have no filing requirement.

Part II of the form is where you calculate how much of your distributions went to qualified medical expenses.³ Only count expenses incurred after the HSA was opened; anything paid before the account existed doesn’t qualify, even if it would otherwise fit.¹

Your trustee will send a Form 1099-SA reporting the year’s total distributions, but they don’t judge whether the money went to a qualified expense. That call is yours on Form 8889. For any premium payments made under the unemployment exception, keep the benefit statements that show you were collecting on the dates you paid, along with the premium bills themselves. If the IRS asks, those records are what protect the tax-free treatment.

1
Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
2
HealthCare.gov. What Are Health Savings Account-Eligible Plans?
3
Internal Revenue Service. Instructions for Form 8889 (2025) – Part II HSA Distributions
4
Internal Revenue Service. Notice 2004-2
5
Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA
6
Internal Revenue Service. About Form 8889, Health Savings Accounts (HSAs)