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FAQ: Can I use my FSA/HSA on health insurance premiums?

Are health insurance premiums an eligible expense with flexible spending accounts (FSA) and a health savings accounts (HSA)? The answer is no, and we'll explain why.

FSAs and HSAs are tax-favored savings plans offered by your employer for the purpose of paying medical expenses.

A qualifying expense must primarily cover medical care to alleviate or prevent a physical or mental defect or illness, which includes dental and vision.

Vision expenses covered by FSAs and HSAs include prescription eyeglasses, prescription sunglasses, contact lenses, reading glasses and eye exams.

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Health insurance premiums are considered a non-medical expense, so you cannot pay insurance premiums with an FSA. 

And, paying your health insurance premiums with your HSA would be considered a non-medical withdrawal. Non-medical withdrawals are subject to taxes and a 20% penalty fee by the Internal Revenue Service (IRS).

However, there are exceptions to these penalties. A tax penalty does not apply if your withdrawal from your HSA is made after you:

  • Turn 65 years old

  • Become permanently disabled

  • Die

Additionally, no penalty or taxes will apply if your money is withdrawn to pay premiums for:

  • Qualified long-term care insurance

  • Health insurance while you are receiving federal or state unemployment compensation

  • Continuation of a health insurance coverage plan, like COBRA, required under any federal law

  • Medicare

Read about the differences between an HSA and FSA to learn which plan is right for you.

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