Small Business Health Insurance – how it affects your business?

Trying to cutback on your small business health insurance can be a bad idea. However you can rise above the monetary problems and obtain the coverage essential for your business. The two major advantages of employer-based coverage are firstly, even though these Health Insurance plans are costly; they generally offer the maximum multipurpose safeguard for you and your employees. Secondly, you can attract and hold on to worthy employees by offering reimbursements.

The reason for the coverage for small businesses being much more as compared to the big businesses is that the health care insurance for small businesses is very expensive. This is because of the high quality coverage offered to a small group of people. For an insurance company, each person from among the group signifies a different level of financial risk. This risk increases and affects several people in the group. Large businesses pay much less because the risk is shared within the large group. While, small business owners are affected by the irrational high rises in payments because of one or two members. The employees of small businesses also need to get insured as per their under state directives. As such, some specific health conditions and treatments need to be covered under the company policies. The Erisa Act of 1974 and the federal law officially exempted self-funded insurance policies from state mandates. This has reduced the financial pressures of larger firms; as also, the large corporations’ pol
icies coming under it, have become self-insured, and have lesser mandated benefits.

The most admired small business health insurance plans are Health Savings Accounts (HSA). An HSA is an innovative approach to health insurance signed into law in December of 2003, made available January 1st 2004. The HSA account is designed to pay for routine medical expenses/and or provide savings for the future. Money put into the account can be used either during the year or accumulated in the account. Allowable medical expenses are defined by the IRS, and are much broader than most insurance carriers (i.e. includes dental, vision). Individuals can deduct dollars contributed to the HSA account from their gross income, resulting in tax-free medical dollars.

HSAs offer small businesses and their employees many advantages:

Security – A high deductible insurance policy and HSA protects employees against high or unexpected medical bills.

Affordability – Employees should be able to lower their health insurance premiums by switching to health insurance coverage with a higher deductible.

Portability – Accounts are completely portable, meaning that employees can keep their HSAs even if they change jobs, change medical coverage, become unemployed, move to another state, or change their marital status.

Ownership – Funds remain in the account from year to year, just like an IRA. There are no “use it or lose it” rules for HSAs.

Tax Savings – An HSA provides triple tax savings:

1. tax deductions when employees contribute to their accounts;

2. tax-free earnings through investment; and,

3. tax-free withdrawals for qualified medical expenses.

HSAs encourage saving for future health care expenses, allow the patient to receive needed care without a gate keeper to determine what benefits are allowed and make consumers more responsible for their own health care choices through the required High-Deductible Health Plan.

About the Author:

Kathleen Joseph is the author of this article on Small Business . Find more information about Health Insurance Plans here.