How an HSA Works
An HSA qualified plan is an inexpensive high deductible health insurance plan. They are very simple because they don’t have copays on doctors visits or prescription drugs before the deductible. In general, the insurance doesn’t pay for anything, other than preventive care, until the selected deductible is reached. Covered expenses will usually be discounted with the health insurance carriers negotiated rate if the insured has not met the deductible.
HSA qualified plan participants have the option to open a retirement account that is a lot like an IRA, except that money can be used to pay for qualified health care costs. This is the Health Savings Account, or HSA, and is like a tax deductible savings account with unlimited investment options to cover current and future medical expenses not covered by the plan (like expenses before the deductible, or non-covered expenses like acupuncture or massage). The money the participant deposits, as well as the earnings, is tax-deferred. The money can then be withdrawn to cover qualified medical expenses tax-free, with unused balances rolling over from year to year until the participant turns 65.
Popular HSA Administrators:
There are unlimited investment options available for your HSA. Check with your local bank and ask friends or co-workers for recommendations. In our experience here are some of the most competitive HSA administrators.
1) UMB Healthcare Services
UMB has a large selection of low priced investment options, from simple savings to a variety of index and mutual funds from Vanguard. You can easily manage your investment portfolio and medical spending with the UMB HSA Saver online platform.
2) HSA Bank
HSA Bank has an intuitive online self-service dashboard to manage your medical expenses and investments.
|Fee/Item||UMB||HSA Bank||Health Equity||Optum Health
Eacc | eSaver | eInv
|Wells Fargo||Bank of America|
|Monthly Fee*||$2.50||$2.50||$3.95||$2 | $3 | $3||$4.25||$4.50|
|Monthly Fee Waiver||$3,000||$5,000||$2,500||$5,000||$5,000||None|
|Paper Statement Fee||Free||$1.50 /month||$1 /month||Free||Free||Free|
|Lost/Stolen/Replacement Cards||Free||$12 per card||$5 per card||Free||Free||Free|
|Debit Card Transactions||Free||$2.00 each (PIN)||Free||Free||Free||Free|
|Investment Options* (Mutual Funds)||2500+||13,000+||41||25||19||26|
|Investment Access Fee||Free||$3.00 /month||Free||$3 | Free | $2.50||Free||Free|
|Excess Contribution Removal||Free||$25.00||$20.00||$20.00||$25.00||$25.00|
|Returned Deposit Items||$3.00||$25.00||$20.00||$15.00||$12.00||$5.00|
|Non-sufficient Funds (NSF)||$25.00||$30.00||$20.00||$25.00||$35.00||$25.00|
|Account Closing / Transfer Fee||$15.00||$25.00||$25.00||$20.00||$25.00||$25.00|
|Years in Business||100+||17 (Webster 78)||12||11||100+||200+|
|Fitch Rating||A+||BBB||Not Rated||Not Rated||AA–||A|
|S&P Rating||A–||BBB–||Not Rated||Not Rated||A+||A–|
- IRS 2011 HSA Contribution Limits
- IRS 2012 HSA Contribution Limits
- IRS 2013 HSA Contribution Limits
- IRS 2014 HSA Contribution Limits
- IRS 2015 HSA Contribution Limits
- IRS 2016 HSA Contribution Limits
- IRS 2017 HSA Contribution Limits
The 2 Parts of an HSA Plan
Part 1: The HSA Qualified High Deductible Health Insurance Policy
The IRS considers a high deductible health insurance plan a policy with a minimum deductible of $1,300 for self-only coverage and $2,600 for family coverage, which are still relatively low. The maximum out-of-pocket (including deductibles and coinsurance) for allowed costs must be no more than $6,550 for self-only coverage and $13,100 for family coverage (these are 2016 HSA contribution limits and out of pocket limits) and preventive care can have first dollar coverage.
An HSA qualified health insurance plan may be purchased without the savings account if you want. By doing this, you would just have a high deductible Colorado health insurance plan with relatively low premiums. However, you’re required to have an HSA qualified health insurance plan in order to set up a Health Savings Account – HSA.
Part 2: The Tax-Exempt Individual Health Savings Account
This part is not required. You can have a qualified Colorado HSA health insurance policy on its own. The savings account is designed to cover routine medical expenses and provide savings. In any given year you may deduct the amount you contribute into your HSA from your gross income.
The IRS 2016 HSA contribution limit is $3,350 for self-only coverage and $6,750 for family coverage.
If you change to a non-HSA qualified plan later on, you can still keep all of the money in your Colorado HSA account itself, you just can’t contribute to the health savings account anymore. You may also still spend the money in your HSA on anything the IRS Publication 502 considers a legitimate HSA health insurance expense.
Don’t put it off!
By setting up an HSA now you can start accumulating literally hundreds of thousands of dollars by the time you retire in your account. This is money that would have gone to the insurance company, but instead was put into your custodial account. When you compare HSA premiums to the price of a typical Colorado health insurance plan, you will really see how much you can save.When you take the money that would have gone to the insurance company and put it into an interest bearing Colorado HSA account, that money will keep building until you turn 65. Do you want to see how much money you could save for retirement by switching to an HSA? Then use our HSA Future Value Calculator.
Let us get you started with a Colorado HSA health insurance plan NOW
If you have been putting off getting an HSA, we will make it easy for you. All you need to do is contact us to request Colorado HSA information and we will do the work for you. Colorado HSA health insurance premiums are significantly lower than traditional fully-insured health insurance plans with co-pays and low deductibles. The money saved on premiums may be used to fund the HSA. In any given year, there is a good chance that the deductible won’t be met, so the money left over in your account is yours to keep. And, you still have very low exposure because once you meet your deductible, the health insurance company pays your medical expenses.
Qualifying Medical Expenses
*See IRS Publication 502 for a list of qualifying HSA expenses. All terms and conditions of coverage, including benefits and exclusions, are contained in the certificate, which shall control in the event of a conflict with this overview. Insurance Shoppers and the Colorado Health Insurance Insider are not engaged in rendering tax, investment or legal advice. Federal and state regulations are subject to change. If tax, investment or legal advice is required, seek the services of a licensed professional.