The Case for Health Spending Accounts: A Valuable Option for Your Small Business Clients

As an insurance advisor working with small businesses, you’re familiar with the challenges your clients face when it comes to employee benefits. Many struggle with the costs and inflexibility of traditional insurance plans. Health Spending Accounts (HSAs) offer a highly attractive alternative for your small business clients. Let’s examine why HSAs might be a fitting choice for them.

Understanding Potential Limitations of Traditional Insurance Plans

 When evaluating options with clients, it can be helpful to consider these common drawbacks of conventional insurance for a small business:

1. After-tax premiums: Employees often pay insurance premiums with after-tax dollars.

2. Deductibles and co-pays: Claims frequently involve employee-paid deductibles or co-pays.

3. High costs for small groups: Insurance companies tend to charge higher premiums to small groups, even with low utilization.

4. Renewal price volatility: High usage by one employee can significantly impact renewal prices for the entire group.

Exploring the Advantages of Health Spending Accounts

 HSAs offer several benefits that may appeal to your small business clients:

Flexibility and Broader Coverage

HSAs allow employees to choose the health services they need, including a wide range of services from dental work to vision care, massages, and more. They often provide broader coverage without common limitations:

• No pre-existing condition clauses

• No brand-specific drug restrictions

• 100% reimbursement for eligible expenses (up to the plan limit)

Budget-Friendly and Predictable

HSAs offer financial advantages such as:

1. Fixed costs: Employers set the contribution limit for each employee’s account, providing predictable expenses.

2. Pay for use: Employers only pay for what their employees actually use, unlike insurance premiums.

3. Age-neutral pricing: Charges don’t increase as employees get older.

Tax Benefits

 HSAs provide tax advantages for both employers and employees:

1. All charges to the employer are tax-deductible for the business.

2. Employees receive a tax-free benefit.

Simplified Administration

 HSAs, specifically the myHSA platform involve streamlined onboarding, less paperwork and faster claims processing compared to traditional insurance plans, reducing administrative burden.

Adaptability to Diverse Needs

 HSAs are tailored to meet the varied health needs of a diverse workforce, bridging the generational gap to help employees who focused on preventive care or those with more comprehensive health requirements.

Important Considerations

 When discussing HSAs, it’s worth noting:

1.  HSAs are well-suited for health, dental, vision, and basic medical services.

2. They may not be ideal for replacing catastrophic or critical illness coverage.

3. Traditional insurance is still recommended for unforeseen, major medical events.

Key Points for Setting Up an HSA

 Factors to consider when exploring an HSA include:

1. Incorporated Businesses: Companies need to be incorporated to set up an HSA.

2. Reasonable limits: Plan limits for owners and executives need to be reasonable with a good rule of thumb being 10-15% of industry-standard salary for their position. High limits should involve a consultation with the corporate accountant.

3. Active employee participation: The plan is for active employees. Working shareholders receiving dividends are eligible, but retired shareholders receiving only dividends are not.

 As an advisor, you have the opportunity to introduce your small business clients to modern, flexible benefits solutions. Health Spending Accounts can offer the adaptability and cost-effectiveness that small businesses often seek in today’s competitive landscape. While they may not completely replace traditional insurance, HSAs are a valuable addition to your clients’ benefits packages.

By presenting this option, you’re offering your clients a way to demonstrate their commitment to their employees’ diverse health needs while managing costs more effectively. Exploring HSAs with your clients could lead to enhanced employee benefits that better suit their unique situations.

Kyle Welsh

Account Executive

myHSA

Allison Gigliotti

Head of Growth

myHSA