Health savings accounts as a healthy alternative for small business health care needs

Health care insurance premiums are always on a continuous upward spiral. With such relentless growth shown by the insurance industry, it pays to think about other options for health care. The health savings accounts were introduced as an alternative to provide for avenues to people who cannot afford conventional health insurance. 

A health savings account is a type of health coverage that is more consumer-directed as it is paired with a high deductible and low premium insurance plan.

A conventional health insurance plan would require you to choose a deductible at the start of the policy term. The deductible is that part of the health care costs that you are willing to hear out of your pocket. The higher the deductible, the lesser your premium will be.  You will also have to choose what services you need to be covered. You can go for general consultation which is the most common health care service. Anything else apart from this will be added to your premium cost. This can include surgery, dental care, mental care, post pregnancy care, baby care, and alternative medicine. If you add up all these essential services, your health care premium will shoot up through the roof.

On the other hand having a health savings account can reduce the burden of having to pay a large amount of premium every quarter or every year. You can go for a health insurance plan with all the frills and then ask for a very high deductible. In order to pay for the deductible costs when applicable, you will have to open a health savings account. The dividends and interest paid out of the health savings account are not taxable if used for health care purposes. And what’s more, after retirement you can access all the savings without having to pay any large scale capital gains tax. Hence you will not only be protected against health care emergencies throughout your life, you will also have a healthy nest egg to rest up on after retirement.

For small business, the health savings account has come as a boon. They do not have to pay hefty premiums anymore. They can provide for the health care needs of their employees without thinking about the large overheads that they will have to incur. The savings that are accrued are owned by the employee and hence can be moved from one employer to another without any qualms. Any contribution that the employer or the employee makes towards the health savings account is not taxable and the dividends are tax deferred. It is much easier to draw up on health savings accounts than IRA’s for any health related expenses.