HSA Permitted Insurance and Excepted Benefits Eligibility

You can keep contributing to your HSA while carrying quite a bit of other coverage, as long as none of it pays for general medical expenses before your High Deductible Health Plan’s minimum deductible is met. Federal law recognizes two carve-outs for this purpose: HSA permitted insurance and excepted benefits. Between them, they cover workers’ compensation, auto and homeowners’ policies, specified-disease and hospital indemnity plans, dental, vision, disability, long-term care, accident coverage, and more. Recent legislation has added telehealth and direct primary care to the list of compatible arrangements.

Permitted Insurance

The tax code lists several categories of “permitted insurance” you can carry alongside an HDHP. What ties them together is that they cover specific risks or pay fixed amounts, rather than reimbursing whatever medical bills you happen to run up.¹

Workers’ compensation coverage tied to workplace injury obligations.
Tort liability insurance that pays when you’re legally responsible for someone else’s injury or property damage.
Property-related insurance, including auto and homeowners’ policies, that covers damage to or liability from property you own or use.
Specified disease or illness policies, like a cancer-only plan, that pay a set benefit tied to a single diagnosis rather than reimbursing medical bills.
Hospital indemnity plans that pay a flat dollar amount for each day you’re hospitalized. A plan paying $200 per day, for example, doesn’t replace your HDHP deductible because the payout isn’t tied to your actual charges.

The line the IRS draws is between coverage that reimburses actual medical expenses and coverage that pays a preset amount triggered by an event. If a policy pays based on the bills you incur, it likely disqualifies you. If it pays a fixed sum when something specific happens, it probably counts as permitted insurance.

Excepted Benefits

A separate statutory category, “excepted benefits,” covers risks or body systems the tax code treats as distinct from general medical care.²

Accident insurance, which pays benefits for injuries from accidents rather than general illness.
Disability insurance, which replaces lost income when you can’t work. Employer-provided or private, it has no effect on HSA eligibility.
Dental coverage for cleanings, fillings, crowns, and orthodontic work.
Vision coverage for exams, glasses, and contacts, whether through insurance or a discount arrangement.
Long-term care insurance for nursing home care, assisted living, or in-home assistance.

Dental and vision cause the most worry because they’re the most common employer-provided add-ons. You can enroll in your employer’s dental and vision plans without a second thought about your HSA. The carve-out applies whether the benefits come through a traditional insurance policy or another arrangement.

Preventive Care Before the Deductible

Your HDHP can pay for preventive care before you’ve met your deductible without affecting your HSA eligibility. This safe harbor exists so people don’t skip screenings and vaccines because they haven’t hit their deductible yet.³

Preventive care for this purpose includes routine physicals, immunizations, cancer screenings, heart disease and diabetes screenings, and tobacco cessation programs. IRS Notice 2019-45 expanded the definition to include specific treatments for certain chronic conditions, such as insulin and other glucose-lowering medications for diabetes and statins for heart disease. Your HDHP can cover these before the deductible without creating an eligibility problem.⁴

Telehealth

For years, pre-deductible telehealth coverage bounced between temporary extensions and gaps. That’s over. The One, Big, Beautiful Bill Act made the telehealth safe harbor permanent, retroactive to plan years beginning after December 31, 2024. Your HDHP can waive the deductible for telehealth and other remote care services with no effect on HSA eligibility.⁵

If your HDHP covers a video visit with your doctor before you’ve met your deductible, that’s permanently fine. Plan sponsors and enrollees no longer need to track expiration dates.

Direct Primary Care Arrangements

Starting in 2026, a direct primary care service arrangement no longer counts as a health plan that would disqualify your HSA. You can pay a monthly fee to a primary care practice for routine office visits and still contribute to your HSA.⁵

There are limits. The arrangement must involve only primary care services from a primary care practitioner. The monthly fee can’t exceed $150 for an individual or $300 for an arrangement covering more than one person. Services requiring general anesthesia, prescription drugs other than vaccines, and lab work not typically done in a primary care office are excluded. You can also use HSA funds tax-free to pay the periodic fees.

HSA-Compatible FSAs and HRAs

A standard Flexible Spending Account or Health Reimbursement Arrangement will end your HSA eligibility because these accounts reimburse medical expenses from the first dollar. Two modified structures preserve compatibility.

A limited-purpose FSA or HRA restricts reimbursements to dental and vision expenses. Because dental and vision are excepted benefits, an account covering only those categories doesn’t conflict with your HDHP. You can use a limited-purpose FSA for fillings, crowns, eyeglasses, or contacts while still contributing to your HSA.⁶

A post-deductible HRA doesn’t reimburse anything until you’ve met the HDHP’s minimum annual deductible. For 2026, it stays dormant until you’ve spent at least $1,700 on self-only coverage or $3,400 on family coverage. Once you clear that threshold, the HRA begins covering additional expenses.⁷

Coverage That Will Disqualify You

Knowing what’s permitted is only half the picture. A handful of common situations quietly make HSA contributions ineligible.

A Spouse’s General-Purpose FSA

This is where most eligibility mistakes happen. A general-purpose FSA covers the employee, their spouse, dependents, and adult children up to age 26. If your spouse enrolls in one at work, you’re automatically covered by it even if you never file a claim. That coverage is disqualifying because it reimburses medical expenses from the first dollar. The fix is straightforward: your spouse should enroll in a limited-purpose FSA (dental and vision only) instead.⁶

Medicare

Once you enroll in Medicare Part A or Part B, you can no longer contribute to your HSA. You can still spend the money already in the account tax-free on qualified medical expenses, including Medicare premiums and copays. But new contributions must stop the month your Medicare coverage begins.

Part A’s retroactive coverage is the trap. When you enroll after age 65, coverage applies retroactively for up to six months. Contributions during those months become excess, subject to income tax and a 6% excise penalty. Standard advice is to stop HSA contributions at least six months before you plan to enroll. Collecting Social Security retirement benefits triggers automatic enrollment in Part A, so you can’t contribute to an HSA and collect Social Security at the same time.

Employer On-Site Clinics

An employer health clinic providing significant medical benefits for free or below fair market value can disqualify everyone with access to it, not just those who use it. Clinics offering preventive care, dental and vision services, and minor treatments like allergy injections or over-the-counter pain relievers are fine. A clinic staffed to handle most medical needs with no copays or deductibles crosses the line into disqualifying coverage.

Non-HDHP Prescription Drug Plans

A separate prescription drug plan that pays benefits before your HDHP deductible is met will disqualify you. If the drug plan has its own lower deductible or covers prescriptions from the first dollar, the IRS treats it as impermissible other coverage. A prescription drug plan that doesn’t pay until the HDHP minimum deductible is satisfied is fine.⁶

Fixing an Accidental Slip

If you contributed while carrying disqualifying coverage, those contributions are excess and get hit with a 6% excise tax for every year they remain in the account. You can avoid the penalty by withdrawing the excess (plus any earnings on it) before your tax filing deadline for that year. Miss the deadline and the 6% tax applies annually until you correct the overage. Excess contributions are reported on Form 5329.⁶

Most accidental excess contributions come from a mid-year change nobody catches: switching from an HDHP to a traditional plan, gaining coverage under a spouse’s general-purpose FSA, or enrolling in Medicare Part A. When any of those happen, adjust your payroll deductions the same month.

1
Legal Information Institute. 26 U.S.C. 223(c)(3) – Permitted Insurance
2
Legal Information Institute. 26 U.S.C. 223 – Health Savings Accounts
3
Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
4
Internal Revenue Service. IRS Notice 2019-45 – Preventive Care for Chronic Conditions
5
Internal Revenue Service. Notice 2026-05 – Expanded Availability of Health Savings Accounts Under the One, Big, Beautiful Bill Act
6
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
7
Internal Revenue Service. Rev. Proc. 2025-19