Can I Use HSA to Pay Insurance Premiums? Rules Before and After 65

Can I use an HSA to pay insurance premiums? Generally no, but the tax code lists specific exceptions: COBRA continuation coverage, health coverage while you’re receiving unemployment compensation, qualified long-term care insurance up to age-based dollar limits, direct primary care arrangements, and once you turn 65, most Medicare premiums. Pay a premium that doesn’t fit one of those categories and the withdrawal becomes taxable income plus a 20 percent penalty if you’re under 65.¹

The rule comes from Section 223 of the Internal Revenue Code, which excludes insurance payments from the definition of qualified medical expenses.¹ IRS Publication 969 puts it plainly: “You may not use HSA funds to pay for insurance” outside the listed exceptions.² The 20 percent penalty on non-qualified distributions drops away at age 65, at disability, or at death, but ordinary income tax on the withdrawal still applies.³

Premiums You Can Pay Before Age 65

Four categories of premiums qualify no matter your age.¹

COBRA continuation coverage. After you leave a job, HSA funds can pay the COBRA premiums that keep your former employer’s health plan in force.²

Health coverage while you’re on unemployment. If you’re collecting federal or state unemployment compensation, your HSA can pay premiums for any health plan during that period, not just a prior employer’s plan.²

Qualified long-term care insurance. Premiums qualify up to a per-person dollar limit that rises with age and adjusts each year for inflation.⁴ For 2025 the caps are:

Age 40 or under: $480
Age 41 to 50: $900
Age 51 to 60: $1,800
Age 61 to 70: $4,810
Age 71 or older: $6,020

The limit runs per person, so you and a spouse can each claim up to the amount for your own age bracket.⁴ Anything you pay above the cap is a non-qualified withdrawal.

Direct primary care arrangements. Flat monthly or annual fees paid to a physician for primary care services also qualify.¹

All four exceptions extend to premiums for your spouse or a tax dependent, provided the qualifying condition (COBRA eligibility, unemployment benefits, and so on) applies to the person actually being covered.²

Premiums You Can Pay After Age 65

Turning 65 opens the door to most health insurance premiums. Publication 969 allows tax-free HSA payment of:²

Medicare Part A (hospital insurance)
Medicare Part B (medical insurance)
Medicare Part C (Medicare Advantage)
Medicare Part D (prescription drug coverage)
Other health insurance carried alongside Medicare

The one carve-out is Medigap. Medicare Supplement premiums remain non-qualified even after 65, so paying them from your HSA makes the withdrawal taxable income.² Because you’re past 65, the 20 percent penalty no longer applies; you just owe regular income tax on the amount.³

If your Medicare Part B or Part D premiums come out of your Social Security check automatically, you can still reimburse yourself from the HSA later. Keep the Social Security statements showing the amounts withheld, and match your HSA withdrawal to those figures.

Paying a Spouse’s Medicare Premiums

You can use your HSA to pay a spouse’s Medicare premiums only once you, the account holder, have reached 65. The age-65 exception attaches to the person who owns the account, not to whose premium is being paid.² An adult child covered on your health plan doesn’t qualify unless they meet the IRS definition of a tax dependent on your return.

Premiums That Never Qualify

Several common premiums stay outside every exception:

Ordinary premiums for an employer plan, marketplace policy, or individual health insurance, unless you’re on COBRA, receiving unemployment, or 65 or older.
Premiums your employer already deducts from your paycheck pre-tax through a Section 125 cafeteria plan. You’ve received the tax benefit once; reimbursing yourself from the HSA would claim it twice.²
Medigap policies at any age.²

Fixing a Premium Withdrawal You Shouldn’t Have Made

If you pull HSA money for a premium that turns out not to qualify, the IRS lets you undo it as a mistaken distribution, provided the mistake resulted from reasonable cause. Return the funds to your HSA by the due date of your tax return (without extensions) for the year you discovered the error, and the distribution stays out of your gross income, the 20 percent additional tax doesn’t apply, and the repayment isn’t counted as an excess contribution.⁵

One catch: your HSA custodian isn’t required to accept a repayment. Call the provider before assuming you can put the money back.⁵

Reporting Premium Distributions

Any year you take money out of an HSA, you file Form 8889 with your Form 1040, even if you’d otherwise have no filing requirement.³ Your custodian will send Form 1099-SA showing the year’s total distributions.⁶

On Form 8889, total distributions go on Line 14a. The portion that went to qualified medical expenses, including eligible premiums, goes on Line 15. Anything left over flows to Schedule 1 as taxable income.⁷ Splitting the qualified and non-qualified amounts correctly is what keeps the 20 percent penalty off the parts that actually qualified.

Records to Keep

Hold premium invoices, proof of payment such as bank statements or canceled checks, and whatever document establishes the exception: a COBRA election notice, an unemployment award letter, an SSA statement showing Medicare premium withholding. Each record should show the date, the amount, and the insurer.

The IRS generally expects you to keep tax records for three years from the date you filed. That stretches to six years if you underreport income by more than 25 percent, and seven years for a bad debt or worthless securities deduction.⁸ You don’t send HSA documentation with your return; the agency asks for it during an audit, so the file needs to be easy to reach three years out.

1
Office of the Law Revision Counsel. 26 U.S. Code 223 – Health Savings Accounts
2
Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
3
Internal Revenue Service. Instructions for Form 8889 (2025)
4
Internal Revenue Service. Publication 502 (2025), Medical and Dental Expenses – Section: Long-Term Care
5
Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA
6
Internal Revenue Service. About Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
7
Internal Revenue Service. Form 8889 (2025)
8
Internal Revenue Service. How Long Should I Keep Records?