My wife and I are retired and no longer have a company-sponsored health plan. We opted to go with Christian Healthcare Ministries, a health care sharing ministry.
I assumed that it would be OK to pay my CHM premiums using HSA funds that we accumulated while working. Now, I'm not so sure. Can you help me out?
No, unfortunately Health Savings Accounts (HSA) only work with high-deductible health insurance plans, so members of healthcare sharing ministries cannot take advantage of HSAs.
Health care sharing ministry programs are not offered by an insurance company, and the benefit is not insurance. Therefore, the membership fees/donations are not reimbursable according to IRS guidelines.
This section (223) is the section on HSAs. In subsection (2) it defines "qualified medical expense", then gives an exception in subparagraph (B) stating that the defined "[qualified medical expense] shall not apply to any payment for insurance." But you yourself said that Health Care Sharing Ministries (HCSM) are NOT insurance, so this subparagraph doesn't apply.
Am I understanding this section of the tax code correctly? I'd love to hear your input, Vince.
Cost-sharing ministry is technically not insurance, we are billed as self-pay. That being said, monthly "premiums," paid with after-tax dollars, are technically NOT ruled out as a qualifying medical expense right? I called my HSA member services and she had no clue what cost-sharing ministry is and if my premiums qualified as a medical expense.. Any ideas?
I hear what you are saying if you are part of a healthcare sharing ministry like Medi-Share you can’t use it to pay your shares (which are similar to premiums),but can you still put money in the HSA and use it to pay for qualifying medical expenses that would go toward your AHP (which is similar to a deductible)?
I’m seeing this for the first time and most of the above answers are wrong.
There are two separate issues. Contributing to an HSA and spending money from an HSA.
Spending is simple. Once you have money in an HSA, you may spend it on any qualifying medical expense for yourself, your spouse, or your dependents. You can spend HSA money even if you are no longer enrolled in a type of insurance that makes you eligible to contribute. Qualifying medical expenses are described in IRS publication 502.
In order to contribute tax-deductible funds to an HSA, you must be enrolled in a qualifying HDHP—high deductible health plan—and have no other medical coverage that would disqualify you. For example, if you enroll in an HDHP at work, and your spouse is enrolled in a different insurance plan that provides back up coverage to you, then you are not eligible to contribute to an HSA. Or, if you are enrolled in a single HDHP at your job, and your spouse has single insurance at their job but also has an FSA, then the FSA disqualifies you because even though it is not in your name, your spouse can use it to pay for expenses for their spouse (which means you) and so you have other coverage that disqualifies you from contributing.
Edited to add: based on new research, a health sharing ministry is not considered "insurance" for 2020 and earlier, and so can't be a qualifying HDHP, and therefore participating in a health sharing ministry can't qualify you to make new contributions to an HSA. See below.
Whether you can contribute new money to an HSA when you are enrolled in a health sharing ministry depends on the exact benefits, premiums, deductibles, and out of pocket maximum of the health sharing ministry. The health sharing ministry should advise you on whether the plan qualifies you to make contributions to an HSA. If you already have money in an HSA, you can use it to pay your premiums and also to pay other expenses, but your eligibility to contribute new money depends on the exact plan benefits and costs and any other health coverage you might have. The exact rules are covered in IRS publication 969.
And actually I have to further amend this answer. You can't use HSA funds to pay for insurance premiums except in limited types of insurance.
You can’t treat insurance premiums as qualified medical expenses unless the premiums are for any of the following.
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).
For 2020, a health sharing ministry is not considered "insurance" under IRC section 213(d), and so your premiums may be paid or reimbursed from an HSA. However, there is a proposal to classify health sharing ministries as "insurance" starting January 1, 2021. This would mean that such payments are deductible medical expenses for the itemized deduction, but it also means that health sharing ministry premiums would be disqualified from being paid from an HSA. (You could still deduct co-pays and deductibles.)
Also, since health sharing ministries are not considered "insurance" under the meaning of the law, they would not qualify as an HDHP and would not allow you to make new tax-deductible contributions to an HSA. You can still use existing money in an HSA to pay expenses, but not make new contributions.
- Hi Opus17, thanks for your great contributions and helpful insights above! I had a follow up question regarding paying premiums for a health sharing ministry plan given that the "premiums" you are paying are actually going towards other individual's medical expenses (at times it might be directed towards your own, if you had a recent "medical" expense that requires sharing). Given that "Qualified Health expenses" can only be incurred by your spouse and dependents, wouldn't that pose an issue when using those HSA funds to pay the premiums? Or would the "Premium" itself qualify as "your" medical expense regardless of where that money is distributed later? Thanks in advance!
Qualified medical expenses are those incurred by the following persons.
You and your spouse.
All dependents you claim on your tax return.
Any person you could have claimed as a dependent on your return except that
Health sharing ministry plan premiums are NOT qualified medical expenses that can be paid from an HSA because health sharing ministry plan is not insurance. They are also not permitted be be claimed on Schedule A as a medical deduction or as a self-employed health insurance deduction for the same reason.
Various bills have been proposed in Congress to change this, but none have become law.