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How to use your Health Savings Account (HSA) to pay long-term care insurance premiums

Posted by: Advisors Management Group in Tips

A health savings account (HSA) enables you to set aside pre-tax money to pay for qualified medical expenses. The advantage is that this may help lower your overall healthcare costs. 

Usually, you can’t use an HSA to pay insurance premiums. But there is a happy exception; you can use your HSA to pay for qualified long-term care insurance premiums.

Keep reading to learn more and reach out to a financial advisor in LaCrosse for additional assistance.

hsa to pay insurance premiums

Benefits of an HSA

An HSA can be invaluable if you have health insurance with a high deductible. As you get older, your deductible limits rise while medical expenses increase, and an HSA becomes increasingly helpful.

An HSA has three major benefits:

  • Tax deduction on contributions
  • Tax-deferred benefits growth
  • Tax-free distributions on medical expenses – that includes long-term care insurance!

“Qualified” long-term care insurance

Of course, like anything else to do with tax benefits, some qualifications must be met. Click to learn about the treatment of qualified long-term care insurance.

To be considered tax-qualified, the long-term care insurance policy:

  • Must be guaranteed renewable
  • Can only pay for long-term care expenses
  • Cannot have cash value
  • Must be structured so all refunds of premiums and policyholder dividends are applied as a reduction in future premiums or to increase future benefits

Withdrawal amounts

There are limits to how much you can withdraw from your HSA to pay for long-term insurance premiums. 

Those limits are based on the age you reached before the end of the tax year, and they typically change every year. The older you are, the more you can withdraw.

Here are the allowed withdrawals for 2022 and 2023:

Age Before End of Tax Year2022 Tax Year2023 Tax Year
40 or younger$450$480
71 and older$5,690$5,960

Contribution limits

In addition to a limit on withdrawals, there is also a limit on contributions.

  • For 2023, you can contribute $3,850 for individual coverage
  • You can contribute $7,750 for family coverage
  • If you are age 55 or above, you may contribute an additional $1,000 to “catch up”

Using your HSA to pay for long-term care insurance

If your HSA has an attached checking account, you may write a check directly to the insurance company. 

You may also pay the insurance company from another source and reimburse yourself.

Contact us for more information about using your HSA to pay insurance premiums

If you have questions about how you can best save money with your HSA,  how you can use it to pay long-term care insurance premiums, or whether your long-term care insurance is tax-qualified, contact us now

Advisors Management Group has offices in La Crosse (608) 782-0200, or you may contact our Eau Claire financial advisors at  (715) 834-9512 or our Green Bay financial advisors at  (920) 434-2192.

Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin. Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security. Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses. Please do not send orders via email as they are not binding and cannot be acted upon. Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services. Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

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