Help!! I’ve lost my job—HSAs and COBRA Enrollment
Losing your job can be scary, particularly the loss of income and health coverage. If you have a Health Savings Account (HSA), you may wonder how job loss affects your ability to keep and contribute to your HSA and whether you can use HSA funds to help pay the premiums for COBRA continuation coverage.
HSA Ownership
I lost my job. What happens to my HSA?
One key fact about HSAs is that they are portable. In other words, you own the account regardless of termination, voluntary or involuntary. HSA funds are yours to spend on eligible healthcare expenses, even if you are no longer enrolled in an HSA-qualified high-deductible health plan (HDHP). After age 65, you can also use HSA funds to pay other expenses without penalty.
HSA and COBRA
Can I pay COBRA premiums with my HSA?
Generally speaking, insurance premiums are not on the IRS-approved list of eligible HSA expenses. However, there are a few exceptions, including COBRA. According to IRS Publication 969:
“You can’t treat insurance premiums as qualified medical expenses unless the premiums are for:
Long-term care insurance.
Health care continuation coverage (such as coverage under COBRA).
Health care coverage while receiving unemployment compensation under federal or state law.
Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).”
Yes, COBRA continuation coverage premiums can be paid from your HSA. In addition, if you are unemployed and receive unemployment compensation, you can purchase other healthcare insurance with your HSA.
You cannot pay COBRA premiums with a Flexible Spending Account (FSA). However, depending on the plan setup, you may be able to pay for COBRA with a Health Reimbursement Arrangement (HRA). Contact your benefits administrator for more information.
HSA Contributions During COBRA
Can I contribute to my HSA while I’m on COBRA?
That depends on the type of coverage you have. You can continue contributing to an HSA if your COBRA coverage includes enrollment in a qualified HDHP. Whether through employment, COBRA continuation coverage, a healthcare exchange, or otherwise, enrollment in a qualified HDHP is always required to open or contribute to an HSA.
The flexibility to pay for COBRA continuation coverage or other health insurance with HSA dollars may help ease some of the challenges of losing your job. Have more questions about COBRA? Visit our COBRA FAQ page.
