Health spending accounts, a perfect option for small and growing businesses

You’ve managed to survive the first few months, or years, as a small business owner, which already makes you a unicorn. Your business is getting too busy for just you to handle so you are finally ready to start hiring some other people to help operate, and grow your hustle. Although this is a moment that warrants celebration, there is also a lot to consider.

Your staff will need a benefits package that is competitive, so that you can retain them. But this benefits package must be one that you can afford, so that your business can adapt to the increased total costs of bringing on new staff—which includes their salaries plus their benefits.

HSA—benefits to your business

One great option for small and growing businesses is to offer a health spending account, or HSA. This account allows you to convert out of pocket, after tax personal medical expenses into a before tax business expense. You can then write-off these medical expenses through your business. This will in effect lower your taxable income.

You can also set a maximum amount that each of your employees, including yourself, can claim on health and medical expenses each year. This can help you to manage your overall spend on benefits.

For example, if you allocate a claim amount of $2,000 to your staff, they can never claim beyond that amount. But if they spend less than $2,000 on their health and dental expenses, then you will only cover the amount that was claimed. This could provide huge savings to your business.

HSA—benefits to your staff

HSAs are also a great option for you and your staff because they provide flexibility. You can decide exactly how to spend their healthcare dollars, and even claim things not covered by some traditional healthcare plans. This includes orthodontics, medically required plastic surgery and medicinal marijuana. Providing such flexibility when it comes to benefits, makes the HSA a great retention tool for small and growing businesses.

HSAs versus traditional group benefits

In many cases, HSAs make more sense than a group benefits plan offered by traditional insurance providers. Small businesses have to pay a pre-set monthly premium, which can be increased if claims amongst staff are higher than in the previous year. This makes it difficult to manage the cost of group benefits. There are also no refunds given for unused benefits.

With traditional group plans, your staff will also have restrictions on how much they can claim for different categories of health and dental expenses (e.g. $500 for dental or $200 for vision), and in many cases there is a deductible meaning that they will likely get only a portion of the claimed amount back.

Requirements and costs

You need a registered business to apply for an HSA, and the only cost to have it is an administrative fee of 10%, plus any applicable taxes, on each claim made. For small and growing businesses, who need to manage costs but want to offer an attractive benefits package to their staff, the HSA seems like the best option.

Applying for a HSA