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Songer Benefits, Inc. Blog

All You Ever Wanted to Know About Insurance

Health Savings Accounts with Medicare

You cannot contribute to a health savings account once you enroll in any part of Medicare.

 That's right, it's a no-no with the IRS and could get you a tax penalty if you get caught doing it.Songer Benefits has many Medicare beneficiaries who work past age 65 at large companies. Some are enrolled in high deductible group health insurance plans through their employers. These plans are considered HSA compatible, which means that the insurance allows you to open a health savings account which you can use to save for future medical expenses.

 As a licensed insurance agent, I'm familiar with HSA plans and how they work. Once money goes into your HSA account, that money is yours forever. It compounds interest over time, and you can use it later to pay for medical expenses in retirement, including Medicare Part B&D premiums, deductibles copays, and coinsurance.

 So, you're hiding until a health plan allows you to contribute to an HSA

But here's the catch you can only contribute or accept employer contributions into your health savings account if you have no other medical insurance. Unfortunately, that includes Medicare. Even if you enroll in Part A once you have Medicare, you can no longer contribute to your health savings account.

Most Medicare beneficiaries who are still working at age 65 enroll in Medicare Part because Part a cost nothing for most people. It coordinates with employer coverage which means it could reduce your hospital spending if you have a hospital stay. Since you are contributing to a health savings account, your situation will be different you will need to postpone applying for any part of Medicare until you retire so that you don't get in trouble with the IRS for contributing into an HSA after you've enrolled in another form of insurance like Medicare.

Fortunately, there is no late enrollment penalty for delaying your enrollment into Medicare parts A or B if you have maintained credible large employer group health insurance that is primary to your Medicare since you turn 65 later when you do decide to retire. If you lose group health coverage, you will have the opportunity to enroll in Medicare parts A&B with no penalty.

 Automatically trigger Part A if you enroll in Social Security income benefits

Also, be aware that you will automatically trigger Part A if you enroll in Social Security income benefits. You cannot collect Social Security income benefits without having Part a, so you mustn't enroll in Medicare or Social Security income benefits until you are ready to stop contributing to your HSA, which for most people is shortly before they retire. What if you didn't realize this. You have already signed up for part A, and you are already taking Social Security income benefits before you retire.

If that's the case, you will need to stop contributing to the health savings account. You can't cancel Part after beginning your Social Security benefits. You'll have to pay back the money you have already received from Social Security if you do. Instead, your best option at this point is to stop contributing. However, you can still use the funds that you've already accumulated in the health savings account and spend them on your Medicare Part B&D premiums funds can also be used for ordinary approved medical expenses such as doctor visits, lab work, dental and vision costs, and prescription copays for more rules about HSA contributions.