Are you taking full advantage of your Health Savings Account (HSA)? Discover which insurance premiums you can pay with it. Owners of HSAs often ask, “Can you pay insurance premiums with HSA?” In some cases, yes! However, the type of insurance premium is a key factor in whether you can pay it using HSA funds.
Let’s discuss some of the main types of insurance premiums you can pay with HSA funds to pay for them.
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Types of Insurance Premiums
According to the Canada Revenue Agency (CRA), you should only use HSA funds for services that directly relate to health, dental, and vision.
The CRA has stated that HSA owners can use HSA money to pay for health insurance premiums. However, you’ll find a lot of different types of insurance on the market, some of which only loosely relate to health. Take a look at the quick reference guide below to see which insurance premiums you can pay with HSA.
Can I use HSA funds to pay the premiums on my:
- Private health insurance — Yes, unless your health insurance only covers naturopathy
- Long-term care insurance — Yes
- Life insurance — No
- Disability insurance — No (because it pays for lost wages, not treatment)
- Employment insurance — No
- Homeowners insurance — No
- Car insurance — No
- Liability insurance — No
Generally speaking, you can spend HSA funds on private health, dental, and vision insurance, but not government insurance plans, including provincial healthcare premiums.
Can You Pay Private Health Insurance Premiums With HSA?
Yes, you can! The CRA has made it clear that you can pay premiums for private health insurance with HSA funds. However, to remain eligible for HSA funds, your private health insurance must cover health and dental expenses. Some of the services that your supplemental health insurance covers may be eligible, while others are ineligible, creating a bit of a grey area.
For example, suppose you have private health insurance that only covers naturopathy and spa treatments. In that case, the CRA may frown upon using HSA funds to pay the premiums. On the other hand, if you purchase private insurance that only covers chiropractic services, then the premiums remain eligible for reimbursement from your HSA.
Most forms of private health insurance policies cover a wide range of services. When viewed individually, some of these services are eligible for HSA funds, and some are ineligible. Yet, the CRA allows the use of HSA funds for insurance premiums that provide covered access to a few ineligible services.
Private Health Insurance Services You Can Pay with HSA
Many Canadians use supplemental health insurance to pay for services not covered by provincial health care insurance. Most of these services remain eligible for HSA funds in their own right. Some of the eligible treatments and supplies paid for with gap health insurance include:
- Chiropractic care
- Acupuncture
- Prescription eyeglasses and contact lenses
- Laser-Assisted in Situ Keratomileusis (LASIK)
- Medical devices and supplies
Private Health Insurance Services You Cannot Pay with HSA
Sometimes, the line between HSA-eligible and HSA-ineligible services can appear blurry. Some of the ineligible services covered by private supplemental health insurance include:
- Herbal supplements
- Spa treatments
- Teeth whitening
- Hair transplants
- Personal training
- Fitness courses
- Liposuction
Can You Pay Long-term Care Insurance Premiums with HSA?
Yes, you can! The CRA allows HSA funds to pay for long-term care (LTC) insurance premiums because LTC services directly relate to health. LTC insurance covers services like nursing home care, home healthcare, adult day care, and similar long-term treatments.
You should consider LTC insurance if your family health history includes a combination of longevity and Alzheimer’s Disease or similar illnesses.
Please note that the amount of reimbursement that you can receive from your HSA may depend on your age when you submit your claim. Your HSA provider may release larger amounts to reimburse you for paid LTC insurance premiums as you grow older.
Can You Pay Life Insurance Premiums with HSA?
Unfortunately, you cannot pay for life insurance premiums with HSA funds. If you take money out of your HSA and use it to pay for life insurance, the CRA will tax and penalize you if they find out about the improper disbursement.
Use caution when researching the subject because you may encounter false information. Always defer to CRA publications regarding HSA reimbursement.
Can You Pay Disability Insurance Premiums with HSA?
Many HSA owners think they can use HSA funds to pay for disability insurance because the benefits go to individuals who miss work due to illness or injury. However, disability insurance does not directly pay for health, dental, or vision services. Instead, the benefits make up for the insured’s lost wages.
The CRA has made it clear that HSA funds cannot pay for disability insurance premiums. If you do use HSA funds for ineligible disability premiums, you will need to pay taxes and penalties on the amount.
How to Use Your HSA Funds for Supplemental Health Insurance
Save money by learning how to use your HSA funds for extended health insurance premiums. The process for seeking reimbursement from your HSA is quick and easy. Just follow the following steps to recoup the cost of your premiums for your gap health insurance, prescription medicine plan, dental insurance, and other eligible programs:
- Download and fill out a claim form from your HSA provider or fill it out online
- Set up your preferred reimbursement method, such as direct deposit, cheque, etc.
- Submit your completed form and copies of your original receipts to your HSA provider
Ensure that you submit old claims within two months of retiring, transferring, or terminating your HSA. Otherwise, your requests will be rejected, depending on which HSA provider administers your claims.
Tax Considerations
Keep in mind that you will need to report all of your HSA disbursements on your annual tax forms. This rule applies even if you use HSA funds for qualified expenses. If you spend HSA funds on ineligible services, you must factor in any additional taxes and penalties. Failure to do so may result in a higher tax rate and even more penalties for failure to disclose your expenditures.
The CRA may waive HSA fund-related penalties if the HSA owner:
- Is over the age of 65
- Suffers from a permanent disability
- Has passed away
Frequently Asked Questions
At Group Enroll, our friendly team members receive lots of questions regarding HSAs and whether you can pay insurance premiums with HSA funds. Find answers to some of the most commonly asked questions below.
According to the Income Tax Act of Canada, you may submit a claim to your HSA for eligible medical, dental, and vision expenses not covered by your (or your spouse’s) provincial or private health insurance policies. Examples include:
- Psychological services
- Erectile dysfunction prescriptions and treatments
- Fertility drugs and services
- Adult orthodontics
If you feel unsure about whether you should submit a claim, contact your HSA provider and inquire about the eligibility of the services you received.
For the CRA to validate a medical expense receipt, it must contain:
- Purpose of the expense
- Date of payment
- Patient’s name
- Name of the doctor, dentist, pharmacist, or optometrist, if applicable
Please note that a cancelled cheque does not constitute a valid receipt.
Depending on your HSA provider, your deadline for filing a claim is usually one, two, or three months from the end of an HSA year. Check your enrollment documents to review when your HSA year ends and how long of a deadline you have to submit your claim.
Business owners often choose to give their employees access to an HSA because it helps recruit the best candidates and retain the most productive employees. During the years when your staff enjoys better-than-average health, your company can save a lot of money because HSAs do not charge a minimum premium.
Health spending accounts often represent the best solution for part-time or seasonal businesses because you do not have to pay anything during the months that your business remains closed. You simply deposit funds into your company’s HSA once a year. Every year, you can assess whether you need to top-off your account to meet the needs of your employees.
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