This answer establishes that Health Savings Accounts (HSA) can be used to pay for co-payments and deductibles.

Suppose that instead footing a co-payment bill with my HSA debit card, I use my HSA to pay for the entire medical bill before insurance, because I'm going to a medical office that asks me to process insurance claims on my own.

Is it okay for me to pay the full bill (e.g.: $600) on my HSA debit card, and then get reimbursed afterwards with my insurance company so that the actual charge is only copay (e.g.: $60)? (The reimbursement would go to my bank account, not the HSA.)

Would this be an example of an HSA Mistaken Distribution? (Something seems off with this situation because it could possibly allow me to avoid more income tax than if I was paying only the partial bill.)

  • Can you explain why you think that this would allow you to avoid income tax? I don't believe that it will, but I want to make sure that I address your concerns.
    – Ben Miller
    Feb 4, 2021 at 2:08
  • In the example above I mentioned that I pay $600 out of my HSA instead $60 out of my HSA. In other words, I'm able to transfer $540 into my bank account tax-free after the insurance payment. (This is a mistaken belief addressed by your answer, thanks!)
    – twink_ml
    Feb 4, 2021 at 8:48

1 Answer 1


Yes, it is okay to pay the entire medical bill with the HSA before insurance covers it. However, when you are reimbursed by insurance, you do need to return that money via the HSA Mistaken Distribution.

When you pay the medical bill, you don't know for sure that you will be reimbursed by insurance, or how much you will be reimbursed. You simply believe that insurance will reimburse you in the future. If you paid the medical bill, it is a qualified medical expense that can be paid/reimbursed through your HSA.

However, once that money does come from the insurance company, that portion of the medical expense is no longer a qualified medical expense, making that portion of the HSA distribution mistaken. It needs to be sent back to the HSA.

Doing this would not result in any difference in income tax. Remember that with an HSA, the tax deduction comes when you put money in (contribute), not when you take money out. You have already gotten your tax deduction when you put money in. If you end up taking out $600 that you then have to put back in later as a mistaken distribution, it doesn't affect your taxes in any way. This is true even if it falls over different years: If you take out $600 to pay for a medical expense in 2021, and then get reimbursed by insurance in 2022 and have to send the money back to the HSA, it does not affect the amount of your tax bill.

Alternatively, if you prefer, you could pay the $600 with your own non-HSA money (from your checking account or credit card). Then, after insurance reimburses you for most of it, you could seek reimbursement from the HSA for the difference. There is no time limit for requesting reimbursement of a medical expense from the HSA.

  • 1
    This is correct because only the co-pay+deductible is an HSA-eligible expense. I.e. your share of the doctor/hospital bill is the HSA-eligible expense. Feb 4, 2021 at 3:58
  • 2
    @OrangeCoast That is one way to look at it. Another way to look at it is that any money you personally spend on medical expenses is HSA-eligible, but anything that you are reimbursed for by the insurance company is not.
    – Ben Miller
    Feb 4, 2021 at 4:01

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