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
Additionally, no penalty or taxes will apply if your money is withdrawn to pay premiums for: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
Read about the differences between an HSA and FSA to learn which plan is right for you.
Page updated February 2020