Hsa - an Alternative to Health Insurance for Small Business

A Home Business Article Contributed by Elizabeth Fox-Wise

Small Business Often Can Not Afford Health Insurance

Health Insurance Costs in America have outpaced the small business budget. America is facing the fifth year in a row of double digit increases in health insurance costs. These outrageous increases are leaving many small business owners and their employees without health insurance.

Congress enacted a new approach to the health care problem called HSA or health savings accounts.

HSA is a new form of consumer controlled health coverage which combines a high deductible health insurance plan with a tax free savings account for medical expenses. the HSA is designed to reduce health care insurance costs for employers and employees.

Can an HSA be a solution for your small business as an alternative to health insurance?

Health Insurance Problems for Small Business

According to a recent report in The Wall Street Journal, big business spends more than $6, 000 per year per employee on health insurance. Health Insurance premiums costs have out grown both the 2.2 percent growth in wages and 2.3 percent growth in inflation by five times. With costs that high, no wonder forty seven percent of America's small business owners are not able to provide any health insurance coverage at all, for themselves or their employees.

Even if the small business owner joins with a business association so he has access to health insurance for the same price as big business, his business budget is still too small to afford the coverage. More and more small business owners are either getting rid of health insurance all together, or having to pass such a big portion of the cost to their employees, forcing many employees of small business to discontinue their coverage.

Can an Hsa Be a Good Health Insurance Alternative for Your Small Business?

There are some benefits to a Health Savings Account that may make you want to consider if for your small business, especially if you currently have no health insurance.

The Savings Account is used in combination with a high deductible health plan. So in the event of serious illness or accident, you will have some insurance coverage.

Your contributions to an HSA are not included in gross income. Therefore, they are tax-free. Furthermore, payouts for qualified medical expenses are also tax free. Accumulated interest and dividends are also tax free (if used for qualified medical expense) or tax deferred (if used for another purpose)

An HSA may help employees to become better health care consumers. Some insurance plans might encourage over use.

Savings through your HSA are owned by the individual and can move from employer to employer. This may help the small business owner to attract employees.

An HSA can "roll over" year after year and if not used for medical needs can create a sizable retirement account.

Unlike health insurance, it can be viewed as a "rainy day fund" health care savings plan. As the money can be drawn on for non-health emergencies too.

A Health Savings Account is one step to help small business without health insurance, to be able to offer something to their employees. An HSA is basically a tax deferred retirement account that is easier to draw from for emergencies.