Group Health Insurance and Health Savings Accounts:

In 2004 the United States Congress introduced health savings accounts in an attempt to lessen the burden that Americans are facing when it comes to paying for their health care. This new plan has changed the face of group health insurance plans for many small businesses. If your employees plan to use an HSA, they are specific things that you will need to do to ensure that your group health plan will meet their needs.

When you have several employees with different needs, this can be very complicated. You may have a small group that wishes to take advantage of health savings accounts and another group who would prefer not to. It can be nearly impossible to cater to everyone's needs, particularly when there are specific restrictions on HSA eligibility for health insurance plans. It is important to involve your employees in any changes that they may experience in their group health coverage if you decide to go with an HSA eligible group health plan.

In the event that your employees cannot come to a consensus on their coverage, you may need to purchase a flexible group health plan that will offer HSA eligible insurance to those who are interested, and regular insurance plans for those who are not.

In order for a health plan to be eligible for an HSA, it must be considered a high deductible health insurance plan. This means that it must have a yearly deductible that is higher than $1000. In addition, plans that offer a co-pay are not HSA eligible. If your current group health insurance plan does not meet these requirements, you will need to find a plan that will offer eligibility for your employees.

Health savings accounts work by offering your employees the option of contributing, using and earning interest on a savings account, tax-free, that will be used to pay for their health care needs. There are specific limits to the amount that an employee can contribute or that you can contribute to the plan for the employee each year.

The contributions to a health savings account cannot be greater than the amount of their yearly deductible or over $2650 for singles and $5250 for families. For example, if your employee's deductible is $1500, they would only be able to contribute $1500 to their HSA each year.

These contributions are considered tax-free and are not subject to income tax at the state or federal level. Each year, the contributions that were made rollover to the next year, increasing the amount in the account. In addition, the interest that is earned in the account rolls over as well.

There are four different ways that your employees can invest their health savings accounts. Each of the four ways allows your employees to earn interest on their savings account free of taxation. They can opt for an interest bearing account, CD type account, Mutual Fund account or a Money Market account.

These funds can be used to pay for their health care premiums, qualified medical expenses, prescriptions and medical supplies. As long as the purchases are considered as qualified medical expenses, they are tax-free as well.

With this new plan, many companies are scrambling to get HSA eligible insurance. If you current company does not offer a group health plan that is HSA eligible, you will need to ask them if there are other options available to your company. If your insurance company will not provide you with this information, it may be time to move to a new company.

Part of staying successful in small business requires keeping your employees happy so that you can retain workers. By offering HSA eligible insurance plans, you can ensure that your employees will be able to enjoy this new method of paying for their health care needs, and you'll stay on top of the latest trends, keeping your company competitive with your competition.

<< Back