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August 2021

Paying HDHP Premiums

With HSA Funds or Reimbursing Oneself From an HSA for Paying Medicare Premiums
An HSA owner who is age 65 or over is able to reimburse himself or herself to the extent they have paid (or are considered to have paid) the premiums for Medicare Part A, Part B or Part D.

I believe the payment of premiums related to Part C would also qualify for tax free income treatment. However, neither the IRS nor HHS has given much guidance on the Part C topic. I believe the premiums for Part C can vary as HHS will negotiate with the Medicare C provider and the Medicare C provider then sets the premium. This premium is sometimes $0.00.

Here is my understanding. The current law is, a person’s paying a premium for a health plan is not a qualified medical expense. Code section 223(d)(2)(B).

Code section 223(d)(2)(C) provides a number of exceptions. One exception is found in subsection(iv) and this exception is quite broad - the payment of any health insurance other than a Medicare supplemental policy qualifies as a medical expense entitled to tax free income treatment. See attached. Any insurance is any insurance.

I admit that I should know more about Medicare. I have Medicare Part C coverage pursuant to a Blue Cross/Blue Shield policy. HHS reduces my Social Security benefit check by $145 every month for my Part B coverage. I have no premium for the Part A coverage. I do have some premium for the Part D coverage. HHS sends all or some portion of this $145 to BCBS. In some previous years I had to pay an additional premium for my Part C/D coverage. This year there is no additional amount. From televisions ads, I get the idea that in some situations a portion of the $145 might be refunded to me.

I don’t have an HSA, but if I did, I understand I would be entitled to reimburse myself for the $145 plus the additional amount for the part C coverage. One year it was $50 per month.

Most Part C plans will include Part D coverage. So there will not be a separate premium for Part D. However, I was late in initially signing up for Part D because HHS does a poor job of explaining a certain situation. To no avail I have suggested to HHS it should improve its discussion. Consequently, I am required to pay a special late penalty premium of $1.50 per month forever. I understand I could pay this Part D premium from my HSA.

There are four parts of Medicare: Part A, Part B, Part C and Part D
• Part A provides inpatient/hospital coverage.
• Part B provides outpatient/medical coverage.
• Part C offers an alternate way to receive your Medicare benefits
• Part D provides prescription drug coverage.

Publication 502
Medicare A
If you are covered under social security (or if you are a government employee who paid Medicare tax). you are enrolled in Medicare A. The payroll tax paid tor Medicare A isn’t a medical expense.

If you aren’t covered under social security (or weren’t a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. In this situation, you can include the premiums you paid for Medicare A as a medical expense.

Medicare B
Medicare B is a supplemental medical insurance. Premiums you pay for Medicare B are a medical expense. Check the information you received from the Social Security Administration to find out your premium.

Medicare D
Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. You can include as medical expense premiums you pay for Medicare D.

Insurance Premiums You Can’t Include
You can’t include premiums you pay for:
• Life insurance policies;
• Policies providing payment for loss of earnings;
• Policies for loss of life, limb, sight, etc.;
• Policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or Injury;
• The part of your car insurance that provides medical insurance coverage for all persons injured in or by your car because the part of the premium providing insurance for you, your spouse, and your dependents isn’t stated separately from the part of the premium providing insurance for medical care for others; or

• Health or long-term care insurance if you elected to pay these premiums with tax-free distributions from a retirement plan made directly to the insurance provider and these distributions would otherwise have been included in income.

Taxes imposed by any governmental unit, such as Medicare taxes, aren’t insurance premiums.