Funding the COB using an HSA

As a reminder, our Care Solutions Continuation of Benefit Rider (COB) is qualified LTCI.

Tax-qualified LTCI are qualified medical expenses under IRC Section 213(d), and so are eligible for payment or reimbursement using tax-free Health Savings Account (HSA) distributions.

Eligible premiums are the lesser of the actual premiums paid or “age-based” premiums.

For a married couple, add the age-based premium for each person to arrive at the eligible amount.

Since it’s extremely difficult for an individual taxpayer to deduct the LTCI premium on Schedule A of Form 1040 using itemized deductions, tax-free HSA distributions are a very tax-efficient method to pay premiums.

Distributions are income tax-free; HSA contributions are income-tax deductible and can be made any time until the individual’s tax-return filing deadline. An individual must be enrolled in a high-deductible health plan to be eligible for an HSA.