IP-2-2002 (April 2002)
Author: Linda Gorman
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Executive Summary
A simple reform to Colorado’s insurance laws could save Colorado families hundreds of thousands of dollars each in lifelong health care costs.
- With simple changes to Colorado’s archaic health insurance regulations, state legislators could save an average family of four almost half a million dollars in health care costs.
- Health insurance policies with higher deductibles offer people the chance to combine relatively inexpensive higher deductible health insurance policies with federally authorized medical savings accounts that would be accepted by preferred provider organizations (MSA PPOs).
- Medical savings accounts work like IRAs. People make tax-free deposits each year and withdraw funds as needed to pay for medical care not covered by their insurance policy. Excess deposits remain in the account where they compound tax-free for future use. Allowable medical expenses are defined by IRS rules, which are far more liberal than those used by insurers.
- An average Denver couple with two children that uses an MSA PPO for health insurance could save $500,000 on its cumulative health care costs between the ages of 23 and 65. At age 65, the couple would have more than $140,000 in its medical savings account. Under federal law, this nest egg could be used, tax free,to defray long-term care expenses or other retirement needs.
- Single men and women could save about $250,000 and retire with more than $150,000.
