Small Business Versus Healthcare Costs
Can David Beat Goliath?
Sole proprietorships. Micro-sized businesses. Small businesses. Some may
say these are "the little guys."
The truth is - when it comes to the economy and prosperity of our country -
there's absolutely nothing "small" about small business. About seven out of
every 10 net new jobs are created by small businesses that together generate
more than half of the output of the American economy. Without a healthy
small business sector, America cannot have a healthy economy.
One of the biggest threats - if not the biggest - to the health of the small
business sector is health itself. Healthcare costs have truly grown into a
towering Goliath of skyrocketing insurance premiums threatening the very
lifeblood and survival of small-business Davids everywhere.
Dramatically increasing and disproportionately higher health insurance
premiums for small businesses prevent many business owners from providing
insurance for their employees or carrying it themselves. Surveys Business
Know-How has conducted in the past have shown that about one-fourth of
business owners don't have healthcare insurance for themselves or their
families. Not surprisingly, many small business owners don't offer health
insurance to their employees either. According to the last U.S. Census
performed in 2003, 45 million Americans were uninsured; the majority of
these uninsured individuals working and employed in small businesses.
Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs), which are part of the Medicare
Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 offer
one way to reduce the costs of health insurance a little bit.
Available to taxpayers since 2004, Health Savings Accounts (HSAs) are tax
free savings accounts that can be used to pay for medical expenses. Under
the law, the HSA must be coupled with a qualifying high-deductible health
insurance plan. Individuals, their employers, or both can contribute funds
each year to HSAs.
HSAs offer these benefits:
- Lower cost insurance. A family of four who sets up an HSA in
conjunction with insurance with a $4,000 deductible might save a little
over $200 a month (after paying for the high-deductible insurance and
making the contributions to the HSA account.)
- Unused monies in these accounts can be rolled over to the next year
to pay for future medical expenses, so unused funds aren’t going to the
insurer.
- HSAs are portable; they can go from one employer to another.
- Tax advantages include: reduction in federal income tax (100% of
monies you deposit into your HSA are written-off against adjusted gross
income), reduction of state income taxes, and payment of medical
expenses with pre-tax dollars. In addition, employer contributions to
HSAs are deductible from employer income and excluded from employee
income for income tax and employment tax purposes.
To set up an HSA account, a worker or employer must first obtain a
qualified high-deductible insurance policy to cover major medical
expenses (deductibles of at least $1,000 for individuals and $2,000 for
families). Workers then cover smaller routine medical expenses by
setting up an HSA of up to $2,650 for an individual or $5,250 for a
family.
To find out more about health savings accounts and how to set one up, go
to the Small Business Administration's website,
www.sba.gov. On the
home page, click onto "Health Savings Accounts" under "Areas of
Interest."
Association Health Plans
The Small Business Health Fairness Act, H.R. 525, introduced in the
House in Feb. 2, 2005, would create Association Health Plans (AHPs),
which would allow small businesses to band together and purchase quality
health care. The legislation, which was passed (for the 8th time) by the
House this summer, has not yet gained approval from the Senate.
Proponents of the bill say it would lower health insurance costs for
employers and their workers by allowing small businesses to band
together through trade and professional associations, and civic and
religious organizations, to purchase affordable health packages for
themselves and their employees.
However, opponents to the legislation (such as the American Diabetes
Association), who say the AHPs would negatively impact millions of people
because the AHPs would be exempt from state regulation and oversight.
What’s your opinion?
What's your opinion? Click on the following link to take our poll
and let us know:
Association Health Plans- Good or Evil?
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