Tuesday, June 07, 2005
HSAs may spawn increased entrepreneurial activity
["HSAs Could Keep You In The Pink," BusinessWeek, 13 June 2005.]
Health care costs are often in the news with regard to their effect on existing businesses, but there is a more subtle toll they take on the development of new start-ups. This article underscores the importance of HSAs in addressing the issue:
[T]he price of health insurance has long deterred budding entrepreneurs who might otherwise leave the corporate cocoon to strike out on their own.
That calculation is changing, in part thanks to the new health savings accounts (HSA) that were authorized in the 2003 Medicare prescription drug legislation.
Anyone can use HSAs, but experts believe they are particularly well-suited for the self-employed. "Entrepreneurs trade off the risk of paying out a couple of thousand dollars in tax-sheltered money in order to protect themselves from catastrophic costs," says Leon Rousso, a certified financial planner in Ventura, Calif. Brad Rosley, who has a wife and three children, also a financial planner in Glen Ellyn, Ill., made the switch. His previous health insurance policy to cover his family cost him $660 a month, or nearly $8,000 a year, with a deductible of $1,000.
Rosley replaced that plan with an HSA. He went for a policy with a $5,100 deductible and put that much into the tax-sheltered account for a family. His premium for the policy is $260 a month, or $3,120 annually. He uses the $400 a month he's saving over the previous policy to fund his HSA. Rosley figures he could well end up with a six-figure account, since any money left in the HSA can be rolled over from year to year. That money can pay for everything from long-term care insurance to a new hip during his golden years.
Rosley's experience appears typical. The average yearly premium on a family policy for an HSA is $3,550 for those aged 30 to 54, according to America's Health Insurance Plans, a Washington trade group. In contrast, private sector employees with a family plan through work pay between $2,100 and $2,400 a year, according to John Ascensio, senior vice-president at Segal Co., a New York benefits consulting firm.
[Devon Herrick, "Health Savings Accounts: The Future Of Health Care For Kansans," The Flint Hills Center, 14 February 2005.]
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