Can You Use HSA for Health Insurance Premiums After Retirement?

Once you turn 65, you can use an HSA to pay health insurance premiums in retirement tax-free for almost every type of coverage a retiree carries: Medicare Part A, Part B, Part D, and Medicare Advantage all qualify, along with your share of employer-sponsored retiree coverage. The important exception is Medigap (Medicare Supplement Insurance), which federal law specifically excludes. A few other premiums — qualified long-term care insurance, COBRA continuation, and coverage while receiving unemployment — qualify under separate rules that don’t require you to be 65.

What Changes at Age 65

Before 65, HSA withdrawals for anything other than qualified medical expenses trigger a 20% penalty on top of ordinary income tax, and most insurance premiums don’t count as qualified medical expenses.¹ The penalty disappears at 65, and the list of premiums that count as qualified expenses expands to cover essentially any health insurance except Medigap.² After that birthday, the HSA does two jobs at once: a tax-free wallet for healthcare costs, and a penalty-free (though taxable) source of general retirement income.

Medicare Premiums You Can Pay Tax-Free

Federal law treats the following Medicare-related premiums as qualified medical expenses once the account holder reaches 65:

Part A premiums, if you owe one. Most retirees get Part A premium-free based on work history.
Part B premiums. The standard monthly amount is $202.90 in 2026, with higher amounts for higher earners.³
Part D prescription drug plan premiums.
Medicare Advantage (Part C) premiums.

Income-Related Monthly Adjustment Amounts (IRMAA) that Medicare adds to Part B and Part D for higher-income enrollees also qualify.³ There is no cap on the premium amount you can reimburse from an HSA for these types of coverage.

Many retirees never write a check for Part B because it’s deducted directly from their Social Security benefit. You can still reimburse yourself from your HSA for those deductions. Keep the Social Security benefit statement showing the amount withheld as your documentation.

Why Medigap Is the Exception

Medigap premiums are the one significant blind spot in the retirement-premium rule. The statute carves out “medicare supplemental policy” premiums from qualified medical expenses, and IRS Publication 969 confirms the exclusion.⁴ The exclusion continues to apply after age 65.

If you draw HSA money to pay a Medigap premium, that distribution is taxable as ordinary income. The 20% penalty no longer applies once you’re 65, but the tax hit is real, and Medigap premiums typically run $150 to $300 or more a month depending on plan and location. Plan to pay Medigap from Social Security, pension income, or a taxable account, and reserve HSA dollars for the premiums that actually qualify.

If you take a distribution and then realize the expense didn’t qualify — an accidental Medigap payment, for instance — you can return the funds to the HSA by your tax-filing deadline for that year and avoid owing tax on the withdrawal.⁴

Employer Retiree Health Coverage

If you have retiree health insurance through a former employer, your share of the premiums is a qualified expense once you’re 65.² The plan has to be a genuine group health plan offered by the employer, not an individual policy you bought yourself. If you’re under 65 and paying retiree-coverage premiums, they generally don’t qualify unless one of the other exceptions below fits your situation.

Long-Term Care Insurance Premiums

Premiums for tax-qualified long-term care insurance are eligible for tax-free HSA withdrawals at any age, not just after 65.⁵ But there’s a dollar cap that scales with your age at year-end. The 2026 limits are:⁶

Age 40 or younger: $500
Age 41–50: $940
Age 51–60: $1,880
Age 61–70: $5,030
Age 71 or older: $6,380

Anything above the age-based limit is taxable (and, before 65, hit with the 20% penalty). The policy has to meet the federal definition of a qualified long-term care insurance contract; your insurer can confirm whether yours does.

COBRA and Unemployment: Two Pre-65 Exceptions

Two other categories let you pay premiums tax-free regardless of age. COBRA continuation premiums after leaving a job qualify as a tax-free HSA distribution.⁴ Premiums for any health coverage during a period when you’re receiving unemployment compensation under federal or state law also qualify.⁷

These matter most for people who leave work before 65. COBRA can run 18 to 36 months, and the premiums are steep because you pay the full unsubsidized cost. Tax-free HSA reimbursement takes some of that sting out.

Paying Premiums for a Spouse

Your HSA can cover qualified expenses for a spouse or dependent, but the premium rules add a twist. COBRA and unemployment-period premiums are tax-free for a qualifying spouse or dependent under the usual rules.⁴

Medicare premiums for a spouse work differently. The 65-and-older test applies to you, the account holder, not to the person whose premiums you’re paying. If you’re 65 or older, you can pay your spouse’s Medicare premiums tax-free from your HSA. If you’re under 65, your spouse’s Medicare premiums generally don’t qualify — even if your spouse is already enrolled in Medicare.⁴

Long-term care premiums for a spouse are eligible under the age-based dollar caps, and the cap is set by the spouse’s own age. A 63-year-old paying for a 68-year-old spouse’s policy uses the age 61–70 limit ($5,030 in 2026) for the spouse’s premium.

Medicare Enrollment Ends New HSA Contributions

Spending is one side of the ledger. Contributions are the other, and Medicare enrollment shuts them off. Once you enroll in any part of Medicare — Part A, Part B, Part D, or Medicare Advantage — you can no longer contribute to an HSA.¹ You keep the existing balance and can still spend from it, but nothing new goes in.

This creates a trap for people who work past 65 and eventually claim Social Security. Signing up for Social Security after 65 triggers automatic enrollment in Part A, and Part A enrollment can be backdated up to six months (though not before the month you turned 65). HSA contributions you made during those retroactive months can be treated as excess contributions and hit with a 6% excise tax each year they stay in the account. To stay clear, stop HSA contributions at least six months before you enroll in Medicare or apply for Social Security. Money already in the account remains yours and stays tax-free for qualified expenses for life.

Reimbursement Timing and Records

There’s no deadline for reimbursing yourself. If you pay a qualified premium out of pocket today, you can withdraw the same amount from your HSA years later, as long as the HSA already existed when you incurred the expense.⁴ Some retirees deliberately pay premiums from other funds and let the HSA balance keep growing, then take a larger reimbursement later.

Whatever timing you use, keep records. The IRS expects you to be able to show that each distribution paid a qualified expense, wasn’t reimbursed from another source, and wasn’t also claimed as an itemized deduction.⁴ For premiums, that means holding onto Medicare statements, Social Security notices showing withholding, COBRA invoices, or employer billing records. Your HSA custodian reports distributions to you and the IRS on Form 1099-SA, and you reconcile them on Form 8889 with your return.⁸

1
Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
2
Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts – Section: Qualified Medical Expenses
3
Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
4
Internal Revenue Service. Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
5
Office of the Law Revision Counsel. 26 USC 7702B – Treatment of Qualified Long-Term Care Insurance
6
Internal Revenue Service. Limits on Deductible Long-Term Care Premiums
7
Internal Revenue Service. Distributions for Qualified Medical Expenses
8
Internal Revenue Service. About Form 8889, Health Savings Accounts