Many of you might have a Health Savings Account (HSA) and realize that you have more funds in the account than you need. Maybe you’re not even sure what an HSA is at all. What can the money in your HSA account be used for?
In some cases, you can use the funds in your HSA to pay health insurance premiums. The more you understand your HSA, the more you can make your tax-free money work for you. Let’s take a closer look.
What is a Health Savings Account?
An HSA is a tax-exempt account that you or your employer can contribute money to, and then you can put those funds toward qualified medical expenses. In order to become eligible for an HSA, you have to enroll in a high deductible plan. Your HSA money is yours to keep and will continue to grow tax-free each year.
Qualified medical expenses, as defined by the Internal Revenue Service could include:
- Hospital services
- Prescription drugs
- Long term care
- Birth control
- Health institute treatment
What about health insurance premiums?
A health insurance premium is the monthly fee charged by an insurance company for coverage. The amount of money charged for your insurance premium is determined by your age, health, residence, and more specific details.
Your HSA money can be used toward insurance premiums, but only specific types, such as long-term care coverage, health coverage while you are unemployed, and federal health care continuation coverage, also known as COBRA. If you are 65 and older, HSA funds can also be used to pay for any health insurance, except Medicare Supplement policies.
However, if you try to use your HSA money to pay for general major medical premiums, that would be considered a nonmedical withdrawal and would face taxes and penalties. Before you decide to use your HSA funds to pay your premiums, make sure your plan qualifies.
