If you own a Health Savings Account, you may have questions about your HSA and COBRA. This article answers questions surrounding HSA portability, HSA and COBRA premium payments, and HSA contributions and COBRA.
Losing your job is a scary prospect. Not only is a source of income gone, but you also face the possibility of losing health coverage. With COBRA, you have the option of paying for and continuing the healthcare insurance coverage you had through your employer. However, people with a Health Savings Account (HSA) have concerns about keeping their HSA, funding the account, and using the funds to pay for COBRA premiums.
I lost my job. Can I keep my HSA?
One key thing to remember with an HSA is that it’s portable; you own the account no matter your job status or if you leave your employer. You can also use your HSA if you aren’t covered by a high deductible health insurance plan. The funds in an HSA are yours to spend on eligible health expenses, and later, after age 65, may be withdrawn for other reasons without penalty.
HSA and COBRA
Can I pay for COBRA premiums with my HSA?
Generally speaking, most insurance premiums cannot be covered by an HSA; they are not included on the eligible expense list published by the IRS. However, there are a few exceptions. According to IRS publication 969:
You can’t treat insurance premiums as qualified medical expenses unless the premiums are for:
- Long-term care insurance.
- Health care continuation coverage (such as coverage under COBRA).
- Health care coverage while receiving unemployment compensation under federal or state law.
- Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap). “
Yes, COBRA premiums can be paid out of your HSA and you can continue coverage. In addition, if you are unemployed and are receiving unemployment compensation, you can purchase other healthcare insurance with your HSA.
You cannot pay for COBRA premiums with a Flexible Spending Account (FSA). Depending on plan setup, you may be able to pay for COBRA with a Health Reimbursement Arrangement (HRA). Contact your benefits administrator for more information.
HSA contributions and COBRA
Can I contribute to my HSA while on COBRA?
The answer depends on the type of insurance coverage you have while on COBRA. As long as you are enrolled in a qualified high deductible health plan, you can make contributions. That is one of the stipulations for opening and contributing to an HSA.
When it comes to your HSA and COBRA, having the flexibility to pay for continuing coverage or other health insurance with your tax-free benefit account dollars can ease some of the fears from losing your job. Have more questions about COBRA? Visit our COBRA FAQ page.