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November 15, 2019

Do I Need a Health Savings Account Once I Have Medicare supplement Insurance?

health savings account and medicare supplement plans

What is a Health Savings Account?

A health savings account (HSA) is a type of savings account that allows individuals to store money on a pre-tax basis to pay for qualified health care related expenses.1 Unlike a personal savings account, an HSA can ONLY be used to pay for qualified medical expenses—and can only be used if you have a high deductible health plan (HDHP).2

What is a Medicare Supplement Insurance Policy?

A Medicare Supplement Insurance policy, also known as “Medigap,” helps individuals pay for health care related costs that Medicare doesn’t cover, including but not limited to copayments, coinsurance, and deductibles.3 While there are an array of different Medicare Supplement Insurance plans available to consumers today, all Medicare Supplement Insurance policy benefits are standardized under federal law for your protection.4 However, that doesn’t mean that your Medicare Supplement Insurance options are necessarily the same between states—as Medicare Supplement Insurance plans available to consumers may vary by state law.5

Can I Use My HSA When Enrolled in Medicare Supplement Insurance?

In short, yes. A Medicare beneficiary can use their HSA to continue to pay for qualified medical expenses not covered or reimbursed by insurance or other source throughout their enrollment in Medicare. As such, those who have an HSA can use their funds to help pay for deductibles and copayments not covered by their Medicare Supplement Insurance policy.6

To What Degree Can I Use My HSA When Enrolled In a Medicare Supplement Insurance Plan?

As mentioned, those enrolled in Medicare Supplement Insurance can continue to use the funds from their preexisting HSA to pay for qualified medical expenses not covered or reimbursed by insurance or other source while under a Medicare plan. However, according to the IRS, those enrolled in an HSA can no longer make contributions to their HSA while enrolled in Medicare.6

In order to continue putting contributions towards an HSA one must be enrolled in a HDHP plan—meaning that those enrolling in Medicare looking to continue their contributions or begin contributing to an HSA either a) cannot or b) must put off their Medicare enrollment and enroll in a HDHP instead.

Conclusion

While enrolling in an HSA is in no way a necessity, it is suggested that those with an HSA looking to enroll in Medicare feel financially secure and satisfied with their existing HSA funds before deciding to make the switch—as individuals enrolled in Medicare can no longer make contributions to their HSA account.6 However, as mentioned, it is worth hanging onto your HSA for as long as possible, as Medicare beneficiaries can continue to use their HSA funds while enrolled in a Medicare Supplement Insurance plan.

  1. HealthCare.gov, Health Savings Account (HSA), 2019
  2. Investopedia, Health Savings Accounts: Advantages and Disadvantages, 2019
  3. Medicare.gov, What’s Medicare Supplement Insurance (Medigap)?, n.p.
  4. Medicare.gov, How to compare Medigap policies, n.p.
  5. Medicare Interactive, Health Savings Accounts (HSAs) and Medicare, 2019
  6. IRS, Health Savings Accounts and Other Tax-Favored Health Plans, 2018

Categories: Insurance, Medicare Supplement

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