Colorado Health Savings Account guide:
BULLETIN: Effective Jan 1st, 2004, the new HSA (Health Savings Account) expanded the original MSA (Medical Savings Accounts) to allow among others, the following improvements:
100% funding of the deductible up to set limits
Permanent program...no longer needs to renewed
No longer requires self-employed status
Both employer and employee funding of accounts for Small Group policies
Now...on to the Health Savings Account
Think of the HSA (health savings account) as a combination between a high deductible insurance plan and an IRA (individual retirement account)
- fund with pre-tax dollars
- accrue interest tax-deferred
- pay out medical bills tax-free
Health Savings Accounts were created to go hand-in-hand with a qualified high-deductible health care plan so that individuals could pay less in monthly dues and put the savings (along with additional funds) in a tax-exempt Health Savings Account. A Health Savings Account allows you to use tax-free dollars to cover routine and minor medical expenses while you satisfy your deductible-expenses that would otherwise come out of your after-tax income.
Let's take a better look at how the Health Savings Account works...essentially there are two parts...
The HSA actually has two components
High deductible Insurance Plan
Tax-favored Savings Account
First, let's look at the insurance part of it.
At its most basic level, a Health Savings Account includes a high deductible plan. You pay a monthly premium like any insurance plan to keep this protection in force. Note that the premium is usually much cheaper than other plans.
A deductible means that in a calendar year for covered expenses, you are responsible for 100% of the deductible amount before the company begins to pay. The other important piece is the Maximum out-of-pocket which refers to when the insurance company then begins to pay 100% (we are talking about catastrophic care here). Usually between the Deductible and the Maximum, you are paying a percentage.
Let's look at an example...
Medical expense relating to surgery: $30,000
Insurance Deductible is $2,400
Maximum is $3,200
20% (of medical expenses) after deductible until you have
met another $800 (up to your max) out of your pocket
In this case, providing you are in network for covered benefits, you would pay:
Deductible at 100% $2,400
20% until total= $3,200 $ 800
Total out of your pocket $3,200
Now keep in mind that if you stay in the network, you will receive negotiated rates, usually a 30-60% discount. To understand why, you can check out our other section, 101. Now, with most HSA plans, the deductible is all inclusive - hospital, doctor, prescription etc.. There are certain preventative benefits which are handled separately so make sure to read the full plan brochure. If you really want a great introduction to health insurance, start here first, otherwise let's look at the exciting half...the medical savings account.
Now let's look at the exciting part for self-employed and small business...the HSA savings account.
By the book, Health Savings Accounts are tax-favored accounts set up to pay for certain medical expenses and to allow for the build-up of savings to pay for future medical expenses. Accounts are set up with banks and certain other qualified financial institutions.
Let's dig a little deeper...
You are allowed to fund this account with up to 100% (up to certain limits) of your plan's annual deductible (pro-rated for less than a year) with pre-tax dollars. This account is set up at a separate institution than the insurance company. Go here to get more information if you already have the insurance set up or want to investigate further.
Money not used rolls over year to year. In fact, it earns interest tax-deferred. Past a certain limit, you can also choose to invest the excess depending on the bank or institution you choose to go with. You can continue to add up to 100% of a year's deductible...year after year. This money is separate from the premium you pay each month to keep your health insurance in place. You own this money just like an IRA or savings account. This is the first part...funding and growing pre-tax.
The second part is where this plans actually surpasses an IRA...
For certain medical, dental, and long-term care expenses, payments made from your established and funded account is not taxed or penalized. At 65 you are able to withdraw this money penalty-free but subject to income tax. If you withdraw the money for non-eligible expenses before the age of 65, it will be subject to a 15% penalty and income tax.
So to sum it up...
High deductible insurance plan combined with a tax-favored Savings account
-fund with pre-tax dollars
-accrue interest tax-deferred
-pay out medical bills tax-free
Now let's check out the monthly premium rates which are much cheaper than standard plans.
Below you can find the rates for HSA plans offered by Blue Cross or Blue Shield of Colorado. But first, a key point about the HSA's rates.
As if the tax benefit wasn't enough...there is a huge savings in monthly insurance premiums when comparing HSA's with other standard plans. This can have a big impact for both the individual and the small group. We cover in-depth, the advantage of high-deductible plans here. Essentially, you are using your premium savings to cover the possible smaller bills that other more expensive plans would cover.
Find the plan you are looking for and click to the right. A new window will appear.
H SA Compatible Plan Instant Quote
Individual/Family Self Employed
Blue Cross Blue Shield Colorado
Small Business (2-50 employees)
Blue Cross Blue Shield Colorado
Now let's take a look at the choice of doctors:
Now, let's look at the networks...
Network refers to the doctors, hospitals, and medical facilities that participate in an insurance plan.
Blue Cross Blue Shield of Colorado uses a PPO(Preferred Provider Organization) network.
To get a really good explanation of the differences between HMO, PPO and EPO...go here
As mentioned before, an important aspect of the HSA is that you can write off qualified medical and dental expenses as well as long term care premium expenses. Let's take a look at what qualifies here.
213(d) Eligible Expenses
The following is a summary of medical expenses that are eligible for HSA reimbursement. For more information, please refer to IRS publication 502. You can order a copy of publication 502 by calling 1-800-TAX-FORM (1-800-829-3676).
Medical services fees (from doctors, dentists, surgeons, quotes, and other medical practitioners)
Prescription medicines (those requiring a prescription by a doctor for their use by an individual) and insulin Oxygen equipment and oxygen Hospital services fees (lab work, therapy, nursing services, surgery, etc.) Please check guidelines for Over the Counter medications from the IRS.
Special items (artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, etc.)
Expenses of an organ donor
Meals and lodging provided by a hospital during medical treatment
Wages for nursing services
(see Publication 502)
Social Security tax for worker-provided medical
care (see Publication 926)
Psychiatric care at a specially equipped medical center (includes meals and lodging)
Capital expenses for equipment or improvements to your home needed for medical care (see Publication 502)
Special school or home for mentally or physically disabled persons (see Publication 502)
Transportation for needed medical care (see Publication 502)
Treatment at a drug or alcohol center (includes meals and lodging provided by the center)
Legal operation to prevent having children
Cost and care of guide dogs or other animals aiding the blind, deaf, and disabled
Cost of lead-based paint removal (see Publication 502)
NOTE: Health insurance premium may be allowed by 213(d), but the HSA law limits these to specific circumstances (see below).
213(d) Ineligible Expenses
The following is a summary of medical expenses that are not eligible for HSA reimbursement. For more information, please refer to IRS publication 502 . You can order a copy of publication 502 by calling 1-800-TAX-FORM (1-800-829-3676).
Surgery for purely cosmetic reasons.
Expenses for your general health (even if following your doctor’s advice) such as:
- Health club dues
- Household help (even if recommended by a doctor)
- Social activities, such as dancing or swimming lessons
- Stop smoking programs
- Trip for general health improvement
- Weight loss program
Funeral, burial, or cremation expense
Illegal operation or treatment
Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc.
Medical insurance included in a care insurance policy
Medicine you buy without a prescription
Nursing care for a healthy baby
Toothpaste, toiletries, cosmetics, etc.
Most health insurance premiums
NOTE: HSA funds may be used to pay health insurance premiums for:
1) Qualified long-term care insurance; or
2) Health insurance while you:
(a) are receiving unemployment compensation;
(b) are entitled to federal or state health insurance
continuation, such as COBRA.
Advanced payment for services rendered next year
Baby-Sitting -- ChildCare
The IRS link here is a great resource for further information into the tax status and workings of the qualified HSA account. We are also compiling a list of helpful resources here at our FAQ's sheet.
Here are some links for further understanding of HSA's...We will be adding quality information as we find it.
United States Department of Treasury
Internal Revenue Service
Council for Affordable Health Insurance
HSA Road Rules
Road Rules (.pdf)
Americans for Free Choice in Medicine
the galen institute
National Association for Alternative Benefits Consultants
Health Savings Account Official Web Portal
Here is a list of stand-alone Health Savings Account administrators. Make sure to contact them directly to verify fees and availability.
|Name, Address, Phone||Set-up fees||Admin. fees||Accountholder Options|
Choice Investments Inc
|$36||1% of account value or min of $36.00 per year.||
Access to investment securities with
min of $250.00. Member of NASD
and SIPC. Checks available in
Brokerage HSA Account.
|$18||$1.75 month if under $3000 balance||debit card and checks; FDIC insured; money market interest or option for brokerage account|
|$25||$5.00/mo.||access to investment services after $1,000 in account; 2-5% interest on money in account per schedule; FDIC insured|
American Health Resources *
PO Box 8847
Can deposit in either "money market-type funds or securities".
Can "self-direct" investments. AHR
Can pay provider or reimburse accountholders.
Health Savings Administrators, LLC
204 N. Hamilton St. Suite 4
Richmond, VA 23221
Admin. fee - Single - $ 35
- Family - $ 60
Fidelity no-load mutual funds including money market
- Any insurance company
- No transaction fees
per mo. depending on plan chosen
Card and checks. Can select money market
or Delaware Funds (min. balance = $1250)
RX card, nurse line, & Dr/Hosp.
Discount plans available.
Oak Hill Rd, 3rd Floor
Bank or $35/Wells Fargo Bank
|$3/mo. (Gateway) or $2/mo. (Wells Fargo)||
process reimbursement requests or
provide checks [disbursement fees = $5
(Gateway) or $10 (Wells Fargo)].
Custodial Fee (Wells Fargo)
$39/yr. Min. account balance for investments = $2500 (avail. thru Wells Fargo only)]
|$10 per employee||
by size of
only with non-tax-qualified
Market. Reimburses insured for medical expenses from the "MESA, Medical Expense Savings Account"
E. Westminster Rd, 3rd Flr
Lake Forest, IL 60045-1899
|No set-up fee||
Ann. Custodial fee $15
Acct. liquidation fee = $15
|Minimum account balance = $1000|
Renewal fee for groups of 2-9 =
|Investments in mutual funds from first dollar (Annual fee of $24 for access to focus fund group.)|
S. State St, 310A
|No set-up fee||$5/mo.||Money market bank accounts only|
Savings of America
Broadway St, 505
|$12||$2/mo.||Visa debit card or checks.|
WestCliff Drive, 310
$500 set-up fee
Account (MRA) Only
|Refers all MSA account requests to American Health Value, MSAver Resources or Merrill Lynch. Pays %Of fees on the MRA to brokers.|
W. 110th St., 520
presently being restructured.
presently being restructured.
|Options being expanded. Please call.|
W. 77th St., 214
$50 or 10%
|Money market only. Will reimburse either provider or accountholder.|
|No set-up fee||
Annual maintenance fee= $75. Check writing privileges @ $10/checkbook
|15 different funds available with a minimum investment of $250 per fund. Automatic investments and telephone exchanges allowed.|
Bank of Howards Grove
N. Wisconsin Drive
|$12 for bank account none for mutual fund account||
(bank acct) $1.75/mo. (brokerage
|May choose bank money market acct. or from 3000 mutual funds. (Trading fees start at $14.95 per trade) Minimum initial deposit of $100|
3500 Grove Ave.
$30 indiv./$60 fam./ year
1.1% x Balance Cust. Fee/Yr.
|May choose from 6 no-load mutual funds or money market|