Ed MacConnell

Health Savings Accounts and You

Health Savings Accounts (HSAs) aren’t new. They’ve been around since late 2003. Initially they were created along with the Medicare Prescription Drug, Improvement, and Modernization Act  to replace the Medical Saving Account System. Initially these plans were designed to help with Drug Costs under Medicare policies; However, as Insurance Premiums increased, more and more Employer and Individual Policies offered High-Deductible Plans to help curb costs. Due to that, HSAs were thrown into the spotlight as a way to use Pre-Tax Dollars to cover out-of-pocket Medical costs.

In 2017, a reported 22million Americans have an HSA. Each year, that number continues to climb. Many people still have a lot of questions about how they can use thier HSA funds. We often get asked if people can pay their Premium for their Health Plan with thier HSA… The short answer to that is, “No” However, there are certain instances when you can use those funds to pay for your Premium. For instance, if you are collecting State or Federal Unemployment benefits or you are paying for COBRA, then you can use your HSA to cover the cost of your monthly premiums. You can also use your HSA to cover some of a Long-Term Care Plan’s premium; however there are strict rules for this.  You can also use HSA funds for many things once you become enrolled in Medicare. Please see this post for common questions about HSAs with Medicare.

The following list provides examples of eligible and ineligible medical expenses. This list is not all-inclusive. Remember, the IRS may modify its list of eligible expenses from time to time.

                          HSA Qualified Expenses

Acupuncture Hearing aids Post-nasal treatments
Alcoholism treatment Laboratory fees Prenatal care
Ambulance Lasik surgery Prescriptions
Artificial limb Learning disability fees (prescription) Prosthesis
Artificial teeth Life-care fees PSA test
Bandages Lodging (for out-patient treatment) Psychiatric care
Birth control pills (prescription) Long-term care (medical expenses) Psychiatrist
Breast reconstruction Long-term care insurance Psychoanalysis
Car special hand controls(for disability) Meals (while receiving treatment) Psychoanalyst
Chiropractors Medical conferences (for ill spouse/dependent) Psychologist
Christian Science practitioners Medicare deductibles Radium treatment
COBRA premiums Nursing care Smoking cessation programs
Contact lenses Obstetrician Special education for children
Cosmetic surgery (from trauma or disease) Operating Room Costs Spinal tests
Crutches Organ transplant Splints
Dental treatment Orthodonture Sterilization
Dermatologist Orthopedic shoes Telephone & TV for hearing impaired
Diagnostic devices Orthopedist Transportation expenses for treatment
Disabled dependent care Out-of-pocket expenses (Medicare) Vaccines
Drug addiction treatment (inpatient) Some Over-the-counter medicine Vitamins (if prescribed)
Eyeglasses Oxygen and equipment Wheelchair
Fertility enhancement Pediatrician Weight loss programs
Guide dog Personal care services (for ill) Wig (hair loss from disease)
Gynecologist Deductible Podiatrist X-rays
Health institute (if prescribed) Post-nasal treatments

Insurance Premiums That Qualify as HSA Expense

Most insurance premiums do not qualify as a health-savings-account expense, but there are a few including:

  • Qualified long-term care insurance
  • COBRA or State Continuation health care continuation coverage
  • Health care coverage while an individual is receiving unemployment compensation
  • For individuals over age 65 — premiums for Medicare A or B, Medicare HMO, and the employee share of premium for employer-sponsored health insurance

Expenses NOT Eligible for under an HSA

The following are expenses that are often mistaken as qualified HSA expenses, but are NOT eligible:

  • Health insurance premiums other than those listed above, including Medicare Supplement, Medicare Part D Rx Plans, and Medigap policies
  • Life insurance or income protective policies
  • The hospital insurance benefits tax, withheld from you pay as part of the Social Security tax or paid as part of Social Security self-employment tax
  • Nursing care for a healthy baby
  • Travel your doctor told you to take for rest or change
  • Cosmetic surgery (unless a wig related to hair loss from disease)
  • Teeth Bleaching
Chances are soon, you or one of your Family members, will have a High-Deductible Insurance Policy that is HSA-eligible. This list is updated by the IRS randomly, so it’s best to check before a major HSA Purchase to make sure it is a covered service. For a more indepth look at HSA-Eligible Expenses, please follow this link  if you scroll down to the bottom of the page, they have a searchable list that is routinely updated. Funds you withdraw from your HSA are tax-free when used to pay for qualified medical expenses as described in Section 213(d) of the Internal Revenue Service Tax Code.  A list of these expenses is available on the IRS website, www.irs.gov in IRS Publication 502, “Medical and Dental Expenses.” Any funds you withdraw for non-qualified medical expenses will be taxed at your income tax rate plus 20% tax penalty if you’re under 65.
As always, if you have any questions about your policy, please feel free to reach out to us at Total Benefit Solutions, Inc. at 215-355-2121