If certain requirements are met, yes. The health insurance plan must be established by the S corporation (Notice 2008-1). A plan is established by the S corporation if:
  1. the S corporation makes the premium payments for the insurance coverage; or
  2. the 2% shareholder makes the premium payments and furnishes proof to the corporation, and the S corporation reimburses the shareholder.  
In order for the 2% shareholder to deduct the amount of the accident and health insurance premiums, the S corporation must report the accident and health insurance premiums paid or reimbursed as wages on the 2% shareholder-employee's Form W-2 (Box 1) in that same year. In addition, the shareholder must report the premium payments or reimbursements from the S corporation as gross income (Line 7) on his or her Form 1040, U.S. Individual Income Tax Return. A 2% shareholder's self-employed health insurance deduction is limited to the shareholder's social security wages (Box 3 from Form W-2) [§162(l)(5)]. Thus, if the shareholder isn't paid a salary or wages other than health insurance, the self-employed health insurance deduction will be zero. Also, the deduction is not available for any calendar month for which the taxpayer is eligible to participate in any subsidized health plan maintained by any employer of the taxpayer, the taxpayer's spouse or any dependent. The 1040 Instructions to Line 29 contain a worksheet to determine the amount of allowable self-employed health insurance deduction. Any amount not allowable as self-employed health insurance is potentially deductible on Schedule A.