Use HSA to Pay for Long Term Care Insurance Premiums

Many people have HSA's and don't know they can pay for their affordable Long-Term Care Insurance with pre-tax money. New 2022 contribution limits were announced by the IRS allowing people to contribute more money to HSAs.

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Use HSA to Pay for Long Term Care Insurance Premiums
6 Min Read June 25th, 2015 Updated:September 17th, 2021

One way many American families save money is by using Health Savings Accounts, otherwise known as HSAs. More American families now have tax-advantaged HSAs they are contributing to through a payroll deduction at work.

Even though more American's are purchasing Long-Term Care Insurance in their 40s and 50s, few are aware they can use the pre-tax money in these accounts to reimburse themselves for the cost of the premiums.

These pre-tax accounts, unlike flex plans, stay with you forever because you own the account. It is your money that can be used for any health-related expense. Health Savings Accounts have become more common as more employers are offering these plans. 

Many people already use this tax-free money to pay for the cost of Long-Term Care Insurance, making what is already affordable an even more significant value for many people. 

Yet, some people have not heard about this money-saving opportunity to pay various health-related expenses with pre-tax money. Plus, for those worked aged 55 and older, the iRS allows you to contribute even more money into an HSA.

2021 HSA Contribution  Limits 

Every year the amount of money eligible to go into these plans increases. See this chart for amounts through 2021.

Contribution Out-of-Pocket Limits for 2021

2022 HSA Contribution Limits 

There is about a 1.4 percent increase in the 2022 limits from 2021.

Contribution Out-of-Pocket Limits for 2022

Look for Open Enrollment if You Don't Have an HSA

Do you have an active account now? If not, when your employer's open enrollment for benefits comes out, you may want to consider a health plan which includes an option with a Health Savings Account. 


You are eligible to participate in a Health Savings Account (HSA) when you enroll in a high-deductible health plan (HDHP) and meet other requirements.


HDHPs typically have a higher annual deductible and out-of-pocket maximums with a lower monthly premium. You must first satisfy the annual deductible before the plan pays for a portion of covered services, known as coinsurance. If you don't use all the money in the account, it stays in your account and earns interest or invested like an IRA. 

Flexible Accounts are Not HSAs

Don't confuse these accounts with FSA's, flexible savings accounts. Remember, Flexible Savings Accounts cannot be used to pay for Long-Term Care Insurance Premiums, and you must use all the money by the end of each year.

Some companies may make employer contributions to your HSA. This is free money to use toward doctor visits, prescriptions, and even a portion of your Long-Term Care Insurance premiums.

HSA funds roll over year to year and can be taken with you if you retire or leave the company. If you are no longer enrolled in an HDHP, you cannot make personal contributions to your account.

Personal contributions via payroll deduction go into your account pre-tax. Since the money goes into the account untaxed, it lowers your taxable income and allows you to set aside money for health care expenses without being taxed as income. 

Any interest earned on the account is also tax-deferred. If the money comes out for a qualified expense, it remains tax-free for health care or toward Long-Term Care Insurance premiums.

Safeguard Retirement Funds with Pre-Tax Money.

With more people planning for the financial costs and burdens of aging, affordable Long-Term Care Insurance has become a big part of pre-retirement planning. These premiums are very affordable, especially if you are in good health. You add the ability to use pre-tax money; the value becomes even more significant.

 People require long-term care services due to illness, accidents, or the impact of aging. People require care at all ages; however, the risk of needing extended care increases with age and becomes the most significant involuntary risk to your income and savings when you retire.

Long-Term Care Insurance provides you with access to your choice of quality care in the setting you desire without placing an undue burden on your family members.

Health Savings Account Advantages

Contributions to the HSA are 100% deductible (up to the legal limit) — just like an IRA if you are self-employed.

  • If you're an employee, the money you contribute gets deposited into the account "pre-tax," – so you are not taxed on that amount. Your employer can also make contributions on your behalf, and the contribution and that amount is not included in your gross income.
  • Withdrawals to pay qualified medical expenses, including dental and vision, drugs, and Long-Term Care Insurance premiums are never taxed.
  • Interest earnings accumulate tax-deferred, and if used to pay qualified medical expenses, are tax-free.
  • You keep the money in your account, and the account is portable if you leave your employer or retire.
  • Others can contribute to your HSA. Contributions can come from various sources, including you, your employer, a relative, and anyone else who wants to add to your HSA.

Qualified Medical Expenses

Examples of qualified medical expenses include (but are not limited to):

  • Acupuncture
  • Alcoholism treatment
  • Ambulance services
  • Chiropractors
  • Contact lens supplies
  • Dental treatments
  • Diagnostic services
  • Doctor's fees
  • Eye exams, glasses, and surgery
  • Fertility services
  • Guide dogs
  • Hearing aids and batteries
  • Hospital services
  • Insulin
  • Lab Fees
  • Long-Term Care Insurance premiums
  • Prescription medications
  • Nursing services
  • Surgery
  • Psychiatric care
  • Telephone equipment for the visually or hearing impaired
  • Therapy or counseling
  • Wheelchairs
  • X-rays

Remember, unlike flexible spending accounts, you don't have to "use it or lose it" with an HSA each year. In fact, more than three-quarters of HSA account holders withdraw less than they contribute, and roughly a quarter of people don't touch any money from their accounts. This means this pre-tax money is growing and working for you.

After Age 65 - Now What?

Once you turn 65, your Health Savings Account still works for you - remember - it is YOUR pre-tax money - growing tax-deferred. 

Once you turn age 65, you can use the money in the HSA in any way you wish. You are no longer required to use the HSA funds only for qualified health care expenses and Long-Term Care Insurance premiums. 

If you use the money for other things, you would just pay the income tax on the funds like normally from any qualified retirement account. 

However, depending on the amount of money in the account, many people continue to use the money for health-related expenses. The money would come out tax-free.

Remember, once you retire, your health savings account continues to work for you. HSA distributions can pay for Medicare premiums for Part B, a Medicare Advantage plan (Part C), a prescription drug plan (Part D), and paying for your Long-Term Care Insurance. This money can also be used for Medicare expenses such as copayments and deductibles if you have any (depending on the Medicare Supplement you choose).

Bottom line

Use your Health Savings Account to help you plan for the financial costs and burdens of aging. Your health, body, and mind will change in the decades ahead, often leading you to require long-term care services. With an affordable LTC Insurance policy, you can safeguard your savings and income and ease the stress otherwise placed on your family. Plus, by using pre-tax money from an HSA, you can plan even more economically. 

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About the Author

An LTC News author focusing on long-term care and aging.

LTC News Contributor James Kelly

James Kelly

Contributor since August 21st, 2017

Editor's Note

Being proactive about long-term health care planning is key to managing your future care and protecting assets. You will want to preserve as much money in your estate, not just for your lifestyle and retirement, but for them once you pass.

As we get older, we see a decline in our health, body, and mind meaning you have a higher risk of needing long-term health care services and supports as you age. 

Affordable Long-Term Care Insurance will give you the tools necessary so you can enjoy your choice of quality care, including in-home, when you need the care. The guaranteed tax-free benefits will safeguard income, assets, lifestyle, and legacy. 

Don't delay; the best time to obtain coverage is when you are in your 40s or 50s.

Planning Tools Available on LTC NEWS

You can compare the major insurance companies that offer Long-Term Care Insurance products here - Top Insurers for Long-Term Care Insurance | LTC News.

The Ultimate Long-Term Care Guide is an outstanding read to help you get a good overview of the topic area. There are also available tax incentives. See if these tax incentives are helpful - Long-Term Care Tax Benefits Guide.

Find all the resources on LTC NEWS - Resources for Long-Term Care Planning | LTC News.

Benefits of Reverse Mortgages

There are many people today that have much of their savings invested in their home. With today's reverse mortgages, you can use the money in your home to fund a Long-Term Care Insurance policy, add retirement income, or even pay for in-home care if you need care now. 

Learn more now - Reverse Mortgages | LTC News.

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LTC NEWS provides free assistance with no obligation - Filing a Long-Term Care Insurance Claim | LTC News. You can also help find caregivers and get recommendations for a proper care plan, whether a person has a policy or not.

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