Can I Use an HSA With a Health Sharing Plan in Colorado?

Here’s how: Simply purchase a smaller policy called HSA MEC.

How It Works

The term “MEC” stands for Minimum Essential Coverage.

These low-cost mini health plans offer basic preventive care and access to telemedicine service for zero out-of-pocket cost. They are affordable, hassle-free, and designed to meet the minimum criteria to qualify as a high-deductible health plan, or HDHP under the Affordable Care Act.

And when you’re covered under a qualified HDHP, and meet certain other criteria, you may make tax-free contributions to a health savings account.

We simply layer the HSA MEC policy on top of your existing health sharing plan. HSA MEC offers preventive care and telemedicine services, enhancing your healthcare options.

So you can benefit from the best of both worlds:

Your health sharing plan is there for major medical incidents and catastrophic medical bills.
Your HSA is there to help you cover your member responsibility amounts, prescription drug costs, medical transportation expenses, and any other out-of-pocket qualified medical expenses that aren’t shared by your health sharing plan – tax free!

This tax-free benefit alone can save you 20% to 40% on out-of-pocket medical expenses, depending on your federal and Colorado state tax brackets and jurisdiction.

Typically, the immediate, first-year tax benefits of HSA contributions more than offset the modest added cost of the HSA MEC policy.

So if you’re able to contribute the maximum to your HSA, or anywhere close to it, it’s normally a very easy decision.

Note: HSA MEC is not meant to be a stand-alone plan. It does not cover major medical expenses, ER visits, specialist care, surgeries, or anything else other than the minimum required by law to qualify as a high-deductible health plan.

That’s why you should either have a good health sharing plan or a traditional insurance policy in place in addition to HSA MEC.

Learn More: The 2024 Colorado Health Sharing Plan Comparison Guide

How Much Can I Contribute to an HSA?

As of 2024, the maximum HSA contribution is $4,150 for an individual plan, and up to $8,300 for a family.

Those aged 50 or older can contribute an additional $1,000 in “catch-up” contributions.

There are no income limits or phaseouts. You can contribute to an HSA no matter how much money you make.

How HSAs Benefit You in Retirement

Meanwhile, anything in your HSA that you don’t need for medical expenses compounds tax-deferred for as long as the money remains in your HSA.

When you turn 65, you can still use that money to pay qualified medical expenses, and even qualified long term care insurance premiums in retirement.

If you don’t need it for those things, then the HSA still benefits you, because the normal 20% penalty on non-qualified withdrawals goes away. You can then use your HSA money as a supplemental retirement fund. With no penalties, you only need to pay the income tax on the money you withdraw, just as you would with a traditional IRA or 401(k).

Next Steps

Once you purchase an HSA MEC, you’ll have an account opened for you with Optum Bank, one of the leading HSA custodians in the country.

You can then contact Optum Bank to start making tax free contributions to your HSA.

Optum Bank will send you the tax forms needed to deduct your contributions from your taxable income when you file your tax return.

HSA contributions are “above-the-line” deductions – meaning you can take them even if you don’t itemize.

If you are in a health sharing plan, or if you want to be in a plan that can save you up to 50% off of the unsubsidized cost of a traditional health insurance plan, and you want to sign up for HSA MEC and begin making HSA contributions, contact a ColoHealth Personal Benefits Manager for a free consultation and quote.

If it makes sense in your situation, we can sign you up right over the phone.

Or, enroll on your own here.

Note for W-2 Employees

If neither you or your spouse falls into one of these three categories, then combining a health sharing plan with an HSA is not an option for you at this time.

But you can still contribute to an HSA if you are covered under a qualified high deductible health plan (HDHP).

Alternatively, you can start a small business or side hustle. Once you receive a 1099, you have a business license, or you have verifiable income from self employment, you can purchase an HSA MEC for yourself, open an HSA, and begin making tax-free contributions.

If you’re in this situation, and you aren’t getting a health plan from your employer and you want to go over your options, we can help.

Click here and pick an appointment time with a ColoHealth Personal Benefits Manager.

For Further Reading: How To Get the Most Out Of Your HSA|How Health Sharing Saves Money for Colorado Residents|2024 HSA Contribution Limits in Colorado