Writing-off health expenses
If you’ve started your own business, you’ve probably already discovered that purchasing a comprehensive health and dental insurance plan can be expensive. But if your business is incorporated, a Health Spending Account (HSA) could be the perfect cost-effective solution with benefits to both your business and staff.
A HSA allows you to write off out of pocket, after-tax eligible medical expenses as before tax business expenses. This lowers your taxable business income, saving you money at tax time. That money goes into a pool that you, the business owner, can disperse to yourself and your employees as a benefit to pay for health-related expenses.
It’s flexible, cost-effective and lets you retain talent while you’re growing by offering comprehensive coverage to employees. But does that mean HSAs are necessarily the better option compared to traditional group benefits for small and growing businesses?
How does an HSA compare to extended health insurance as a business owner?
An HSA offers a lot of advantages over extended health insurance, especially for small and growing businesses.
Generally, HSAs are more flexible to you as a business owner. Unlike traditional plans, an HSA has no premiums or deductibles. Instead, you set the benefit budget per employee and pay a small percentage of each claim made; any unclaimed contribution amount can be reclaimed at the end of the year.
With a traditional plan, the insurance company can increase the cost from year to year, whereas with an HSA you have full control over the budget. That means you’ll have a better handle on your business expenses during a critical time of business growth; and at the same time, can claim those business expenses at tax time!
You can also set different classifications for your employees with different benefit caps attached to each; for example, $8,000 for full-time employees and $5,000 for part-time employees. And you can disperse benefits to consultants in addition to staff, which many small businesses rely on in the early growth stages.
How long does it take to set up the HSA?
Setting up an HSA plan can be done within a matter of hours, whereas traditional insurance can sometimes take months of quoting and underwriting. When you’re looking to hit the ground running with the best possible team, time is of the essence.
How does an HSA compare to a group benefits plan for your employees?
HSAs are more flexible and comprehensive than traditional plans for your employees as well. Your employees can spend their annual HSA dollars towards approved medical expenses however they choose, without the kinds of caps that exist with traditional plans on claims tied to different categories of health and dental expenses or practitioners. Plus, the list of eligible medical expenses for an HSA is much longer than most traditional health insurance plans.
Not everything is covered though; some expenses which have not been prescribed by a doctor or deemed medically necessary, such as cosmetic procedures, may not be covered. And depending on an employee’s annual benefit cap, certain large expenses might not be covered; for example, experimental treatments or drugs for conditions like cancer can run upwards of $20,000, which is above the typical maximum HSA spend cap.
Get the most comprehensive coverage through a hybrid plan
If you want to get the tax benefits of an HSA but also stay protected against large emergency expenses and other expenses not covered by an HSA, Bounc3 can set you up to do both using a hybrid approach. You can fill the gaps in HSA coverage by purchasing select extended health insurance products. Get in touch with us for a quick and free consultation on what can work best for you.