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Changing Health Insurance Coverage and Your HSA

Changing Health Insurance

Health Savings Account (HSA) owners can truly appreciate the abundance of perks of having this healthcare account.

First, there is the triple tax savings of tax-free contributions, tax-free withdrawals for eligible expenses, and tax-free account growth through investing and interest. Next, all unused funds stay in the account and carryover to the next year. Plus, an HSA is owned by the individual (unlike an FSA) and it stays with you, no matter if you leave your employer for any reason. With all of these advantages, HSA owners may wonder about what happens to their account when my health insurance coverage changes.

I have the answers below.

HSAs and Changing Health Insurance Coverage

To open an HSA, you must be enrolled in a high deductible healthcare plan. Life happens, however, and sometimes you have to change your healthcare insurance coverage.

One of the big perks is that an HSA is portable. That means you’ll keep your HSA regardless of your employment status or healthcare coverage. However, some things may change when your coverage changes.

Can you use your HSA funds?

Yes, you can continue to use your HSA dollars. Your insurance coverage status does not change how you can use your account. Whether you have new coverage that is not a high deductible plan, or no insurance coverage at all – you can still use your HSA balance.

No matter what, you must still follow the IRS rules for purchases with those HSA dollars. As long as you use the funds for eligible healthcare expenses, you can continue enjoying tax-free distributions.

Can you contribute to your HSA?

Whether or not you can continue to make contributions depends on your new insurance plan. You can contribute to your HSA so long as you’re enrolled in a qualified HDHP. If you change to a non-HDHP plan, you can no longer make contributions. The HDHP enrollment rule also applies to outside contributions (those from an employer or other person).

If you later re-enroll in a qualified HDHP, you can resume contributing to the account.

Can I use my HSA when I retire?

Yes. This is one of the most popular perks, particularly for people who have been able to build up their account balance.

Once you reach age 65, you can use your HSA dollars for any expense without penalty. This benefit does not change when your insurance coverage changes, even when you enroll in Medicare. Keep in mind, you will still be taxed on non-qualified expenses.


In short – you don’t have to worry about your HSA dollars if you change insurance coverage. The account is yours to keep and use, no matter your insurance status.

The Adventures of Captain Contributor is an award-winning employee education program developed by DataPath, Inc.