If you’re a sole proprietor or have 10 or fewer employees, chances are you and your workers aren’t getting your money’s worth with a traditional employee benefits plan.
Enter the Health Spending Account. Not only will an HSA be better utilized by employees, as a business owner it can save you hundreds – even thousands – of dollars. (That got your attention didn’t it?) And if you’re a larger company with a benefits plan, an HSA can still work for you or add to what you already have.
Not sure what an HSA is, what its advantages are and whether it will work for you? Here’s the lowdown.
What the heck is an HSA?
A Health Spending Account is a budgeted amount of money that a business owner provides to his or her employees to spend on health-related expenses. A self-insured, private health plan, it can be used as standalone coverage or to supplement a traditional employee benefits plan. As with traditional benefits plans, HSAs are 100% tax-deductible for employers, but employees do not contribute.
Think of it like a bank account into which you, the employer, put a predetermined amount per employee; your employees (including you) are then reimbursed from that account for a wide array of health-related expenses, including those not necessarily covered by other benefits plans. Essentially, you control the payment and your employees control what they spend it on. You only pay for expenses that are actually claimed.
Who HSAs work for
HSAs work for any size company in various scenarios. Some of my larger clients with traditional benefits plans use it to pay for vision care for those employees who wear glasses so that the rest of their employees don’t end up paying for a service they’ll never use.
For smaller companies with less than 10 employees or newer companies with no coverage at all, it’s a great way to get started. Employers can put aside as little as $100 per employee per year with a health spending account.
Employees benefit because they’re in charge of where they spend their money. Laser eye surgery, orthodontics, fertility treatments, and all sorts of things that aren’t normally covered by group benefits.
How an HSA saves you money
As an employer, you only pay for expenses your employees actually claim. With a traditional plan, money that isn’t claimed by your employees is kept by the insurance company. So if your plan cost $5,000, but your staff only made $2,500 worth of claims, the remainder of that initial $5,000 outlay goes to the insurance company.
If you’re the sole employee, HSAs make it so that you’re not spending your after-tax dollars on medical and dental expenses.
A few other benefits of HSAs
HSAs are almost embarrassingly simple – employers contribute a certain amount, employees can only spend that much and can use it any time. (No more waiting periods!) No quotes or medical underwriting is necessary. Also, employers can give long-time employees more money than the newbie three cubicles down.
HSAs can also work in conjunction with other plans. Heck, it can even be used to pay for another traditional plan if that’s what makes sense for your employee or your family!
Why don’t HSAs get more attention?
Essentially, HSAs don’t get the press they deserve because insurance brokers don’t make much money on them. But at ADI Benefits, we work for you. We want you to have the best plan for your situation.