Do Your HSA Premiums Apply to the Deductible?

Health Savings Accounts are accounts that someone with an HSA-qualified high-deductible health insurance plan can use to set aside money to pay for medical expenses. Because the insured person is willing to pay more medical expenses up-front than with a more traditional health insurance plan, the premiums can be lower than traditional individual or group health insurance policies.

Things That Apply to Your HSA Deductible

• Every high-deductible health insurance plan has its nuances; your health insurance policy will offer a complete list of what does and does not apply to your deductible. HSA plans are typically structured to count health-related expenses toward your deductible that are not included in a traditional PPO health insurance plan. For example, the cost of prescription medication and office visits with your doctor usually are applied toward the deductible in an HSA plan. In a traditional health insurance plan, co-pays do not count toward the deductible.

Things That Do Not Apply to Your HSA Deductible

• Other health-related expenses like over-the-counter medication and your health insurance premium do not count toward your deductible. Depending on how your specific health insurance policy is written, alternative medical treatments like acupuncture may not apply to your deductible either, although you can use funds in your HSA to pay for these treatments. The Affordable Care Act of 2010 changed the status of some over-the-counter medications from eligible to ineligible expenses; your insurance carrier can update you on how this may have affected your insurance policy.

Considerations

• If you are self-employed, your health insurance premiums may be a tax-deductible expense. The Internal Revenue Service has specific criteria that must be met in order to deduct your health insurance premium. The instructions for your Form 1040 tax return detail these criteria. You can also withdraw funds from your HSA tax-free to pay the cost of COBRA coverage if you are unemployed or in the waiting period for group health insurance benefits to become effective. It is recommended that you discuss your specific circumstance with an accountant to avoid unwanted taxes or penalties.

Warnings

• Improperly using funds from your health savings account can result in the IRS deeming those funds as income. Not only will this amount be added to your taxable income for that year, but you will be assessed a 10 percent penalty on those funds as well. Like other types of insurance, your premium will not apply to your health insurance deductible, but there are circumstances where the premium may be tax deductible.