January 30, 2007
Volume 3 Issue 97

Health Care on the Rise

            As we have all seen over the past few years, health coverage has become more and more expensive and difficult for small businesses to provide. With the rates constantly increasing, it is time to look for other ways to provide health coverage for your employees. The graph to the left shows the relationship between overall inflation, workers’ earnings, and health insurance premiums. As you can see, the workers’ earnings were above the overall inflation rate; while at the same time, the rate for premiums soared over both. With rates this high and the difference between the two so significant it’s easy to see why many have turned away from providing traditional forms of health care for their employees. Though it may seem like the days of small businesses being able to provide health care are fading out, this is not the case. There are other ways to provide health coverage for employees without going broke. Two of these ways are known as Health Savings Accounts (HSA’s) and Association Health Plans (AHP’s).

       In 2006, the President spoke at the Small Business Week Conference addressing the topic of healthcare. He suggested that small businesses take advantage of HSA’s (Health Savings Accounts). These accounts allow employees and employers to save tax-free money to use for routine expenses in addition to having an HSA-qualified insurance plan which would cover larger charges and preventive care. An HSA-qualified insurance plan would include a high-deductible health plan. The government classifies this as a plan with a $1,050 deductible for single-person and less than $5,250 annual out of pocket spending and $2,100 deductible for family coverage and less than $10,500 annual out of pocket cost. Instead of being controlled by the employer, these accounts are owned by the employee, therefore giving people the freedom to use their money however they feel best for medical coverage and their employer cannot dictate where they spend the money or what amount is rolled over into the next year. An HSA is completely portable and can be saved from year to year. For employers, this is a very inexpensive way to ensure that all of your employees are getting the coverage they need while also obtaining all the tax benefits of every dollar put into the system. In his speech, Bush noted that the number of HSA’s has significantly risen from one million to three million. He also proposed that the limit of how much tax free money one is allowed to save be raised making the idea more appealing. These HSA’s operate much like 401K’s and not only prepare you for current medical expenses but also prepare you for the future.

         So how do you set up a HSA account? HSA’s are provided through banks, however if you are unsure which banks offer this program, there is a website known as HSAfinder.com (http://www.hsafinder.com/). This website provides information on HSA’s and where you can go to set one up. HSA Insider, (http://www.hsainsider.com/), is another great website that allows you to compare HSA’s to find the one perfect for you.

         Another option for providing inexpensive health care to employees is known as an Association Health Plan (AHP). These plans allow small businesses to group together and therefore have the ability to compete for the same discount large businesses get on health insurance. This is a creative way to “level the playing field.” There has been a large amount of legislative debate over this type of plan. Some say it is the only way for small businesses to get a fair price on health care while others speculate it might be disastrous for the whole health care industry. Either way, they are something to be considered when looking to provide health coverage for your employees.       

So how do you join an AHP? When thinking about joining or creating an AHP, you must consider the fact that these associations, in order to be considered, must be formed for some reason other than just to provide inexpensive health coverage. Meaning, you must have something else to offer than just health insurance. A major disadvantage to consider is that these plans do not include the same security as other plans and therefore could lead to disaster as premiums are subject to major increases. It is very important to research all the pros and cons before investing in something like an association health plan. Affinity Health Plans is a provider of health care for a multitude of associations. One of the associations listed under their clientele list is the National Federation of Independent Businesses containing 600,000 members. For information on other associations they provide to and more information on AHP’s, visit their website at http://www.affinityhealthplans.com/.

           When choosing which option is right for your company, is it important to weigh the pros and cons of both options. HSA's are a great way for your company to not only provide the insurance your employees need, but also obtain major tax benefits from the money put in. While on the other hand, AHP’s allow you to be eligible for the same discounts as large businesses receive. Either way is a great option to avoid the increasing rates of traditional health coverage.

Providing Healthcare doesn’t always have to cost big $$

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