If it is reported as a scholarship, it would be taxable if you do not have education expenses to apply it to.
Health Insurance is NOT an education expense that can be matched to a scholarship to make that portion of a scholarship tax-free.
Therefore, if the scholarship can only be applied to Health Insurance (no education expenses available) YES, it will be taxable.
Additionally, if taxable, you will pay Income Tax but not FICA (Social Security) tax.
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