Using HSA to pay for ACA health insurance premiums after COBRA.

[mijohn]

I retired in March of 2023 at age 62 and chose to continue my health insurance via COBRA, using my HSA to pay for it, beginning in April of 2023. If I decide to switch to an ACA plan with coverage commencing in January 2024 is that still considered "continuation" coverage such that I can still use my HSA to pay for the ACA premiums?

[Opus 17]

No. A new policy is not a continuation policy under COBRA.

Insurance premiums.

You can’t treat insurance premiums as qualified medical expenses unless the premiums are for any of the following.

1. Long-term care insurance.

2. Health care continuation coverage (such as coverage under COBRA).

3. Health care coverage while receiving unemployment compensation under federal or state law.

4. Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).

The premiums for long-term care insurance (item (1)) that you can treat as qualified medical expenses are subject to limits based on age and are adjusted annually. See Limit on long-term care premiums you can deduct in the Instructions for Schedule A (Form 1040).

Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. For item (4), if you, the account beneficiary, aren’t 65 or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) aren’t generally qualified medical expenses.

[dmertz]

Continuation coverage as defined in section 223 of the tax code is continuation coverage required by federal law.  (I'm not aware of any such coverage other than under COBRA.)  A new policy would not be federally required continuation coverage.

Since funds in an HSA grow tax free as long as the money in the HSA is eventually used for qualified medical expenses, spending the HSA funds on medical expenses now, including COBRA payments, might not be the best long-term strategy anyway.