04 Feb HSA Solution to Obama-Care
Have the health care reforms left you perplexed? Perhaps you have the feeling that your business can no longer afford to help your employees (or yourself) with health care.
You will be glad to hear that is not so!
Consider a health savings account (HSA). HSAs survived the Obama-care reforms, and they may be just the tax-advantaged health care solution you have been searching for.
Three Reasons to Like HSAs
First, for an employer, the HSA makes a great fringe benefit. You can contribute to your employees’ HSA accounts on a tax benefit basis, where you get a tax deduction and the employees have no taxable income. And you can do this without paying the high costs for covering your employees with health insurance.
Second, monies in your and your employees’ HSAs for which you received the tax deductions are monies available to pay qualified medical expenses.
Third, you can use the HSA without subjecting yourself or your business to the $100-a-day penalty for failing to provide group health insurance coverage if you have 50 or fewer employees.
For more essential information on HSAs, please contact me.
The High-Deductible Catch
You may ask, if HSAs are so useful, why doesn’t everyone use them?
The reason is that to qualify for an HAS you need a high-deductible health insurance policy.
Big Change: Free Preventive Services
As you know, Obama-care changed many of the rules for health insurance providers.
Now, under the new law, all new health plans must offer preventive services without cost.
Thus, for services such as checkups, cancer screenings, and vaccinations, your insurer cannot require co-pays, co-insurance, or a deductible.
This means 2014 high-deductible health insurance policies will have preventive services built into them. And the really good news is that the IRS recently published guidance confirming that the insurer’s payments for preventive services inside HSA-compatible plans are totally acceptable under the new health care law.
Check for HSA Compatibility
Most plan descriptions tell you whether or not the plan is HSA-compatible. If a plan does not indicate whether it is HSA-compatible (or even if it does), you should check the numbers.
Here are the 2014 limits for HSA-compatible high-deductible health plans.
|Single Coverage||Family Coverage|
|Contribution limit to the savings part (the HSA)||$3,300||$6,550|
|Minimum deductible for the high-deductible insurance policy||$1,250||$2,500|
|Maximum out-of-pocket expenses for the high-deductible insurance policy||$6,350||$12,700|
You may have wrestled with the new Obama-care rules when considering a “group health plan” to cover your employees. Fortunately, HSAs don’t fall into the “group health plan” category.
Therefore, you as an individual or as an employer may continue to make contributions to HSAs without worrying about the changes in the law.
If you offer HSA benefits, your employees purchase their own health insurance. They decide what coverage is right for them and determine their own eligibility for credits and discounted coverage.
When you contribute to an employee’s HSA (the savings account), you deduct the contribution as a business expense, and your employee receives his or her addition to the HSA tax-free.
Old Rules Still Apply
Don’t forget that the old rules governing HSAs are still in effect. So if you offer HSA contributions to any of your employees, you must offer “comparable” contributions to all employees.
For further information on the comparability rules, please contact me.