June 4, 2010
HSAs: A Smart Way to Make Health Care Affordable With the cost of health care rising, many small businesses are taking a look at health savings accounts (HSAs). This option combines a high deductible health plan (HDHP) with a savings account. J.P. Morgan recently released a new "Best Practices" report for implementing an HSA program. You can download the free guidebook here (registration required). A May 2010 census completed by America´s Health Insurance Plans shows that there are now more than 10 million HSAs, up from 8 million the year before. (To access the report, please visit: http://www.ahip.org/content/pressrelease.aspx?docid=30516.) As tax expert and business advisor Barbara Weltman notes in her latest "Tax Idea" for Women Entrepreneurs Inc. (WE Inc.), the beauty of the savings account is a triple tax break: money goes in a tax-deductible basis, earnings on the contributions grow tax-deferred, and withdrawals to cover medical costs (including over-the-counter medications) are tax free. Here is more information on HSAs taken from Barbara's "Tax Idea": Employees value HSAs because the account balances can carry over if not used up, creating additional savings for them. Also, HSAs are portable, so if when they leave the job, the accounts go with them. In order to help businesses plan ahead, the IRS has released HSA limits for 2010. The following chart shows the limits for this year and next for individuals with coverage for only themselves as well as for family coverage: | 2009 | 2010 | Self-Only | Family | Self-Only | Family | High deductible health plan deductible at least: | $1,150 | $2,300 | $1,200 | $2,400 | Policy out-of-pocket expense limit: | $5,800 | $11,600 | $5,950 | $11,900 | Deductible contribution limit (under age 55): | $3,000 | $5,950 | $3,050 | $6,150 | Deductible contribution limit (age 55 or older): ---One spouse ---Both spouses | $4,000 | $6,960 $7,950 | $4,050 | $7,150 $8,150 |
The HSA can be set up in any way that makes sense for the company. For example, the company can obtain the HDHP, which costs much less than traditional coverage, and allow employees to fund their own HSAs. The HSA contributor -- company or employee -- is the party that gets the tax write-off for contributions. Alternatively, the company can pay the entire cost; even with the HSA contribution, the cost is lower than that for traditional coverage. For more about HSAs, visit HSAInsider, Health Decisions, HSAfinder, and eHealth Insurance and click on BusinessHSA. (You can sign up for Barbara Weltman's Big Ideas for Small BusinessTM, a monthly print newsletter providing important and timely information for small business owners about saving time and money, avoiding trouble and boosting the bottom line, by visiting: http://www.barbaraweltman.com.) Alert: HSAs are threatened under the new health care law. SBE Council is working to Protect HSAs and preserve health care choices. For additional information, please visit: http://www.sbecouncil.org/protecthsas/ Karen Kerrigan, President & CEO
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