Health Savings Accounts are a business opportunity
17 03 08 - 12:34
Business owners never like to sit tight. We're always thinking of new schemes to make our millions. Chocolate chip cookies stuffed with bubble gum. Golf balls with GPS devices. A working cell phone.
We're jealous of those entrepreneurs that fail at 87 businesses before finally getting it right. We've seen those photos of them vacationing in Tahiti with a bikini-clad model under each arm, and we say why not us?
So, as a public service to anyone who wants to start a new business, here's a great idea to chew on: Sell and service Health Savings Accounts (HSAs). No, I'm not kidding. What the hell are HSAs you ask? Exactly! I say. If you're not intimately familiar with them now, you will be. Oh, you will be.
HSAs are not new. But they're getting hot. How do they work? How can you cash in? Read on.
First, you need to find a new client... any business with more than five employees and a standard health insurance plan will do. Let's say your marketing machine produces a prospect for you. We'll call him Bob. "Bob," you say. "It's time to make some changes to your employees' health insurance and really save them some money."
You then sell Bob a new health insurance plan that's been preapproved by the government (or you might be able to use his existing one). The biggest change is that the deductibles get raised significantly (and his premiums go down accordingly). But before Bob and his employees panic, you explain to him that at the same time you're going to open up a Health Savings Account for each participant. No worries.
During the year, when Bob gets his paycheck, an amount comes out and is deposited into his own HSA account that you administer. It's taken out before taxes, lowering his taxable income (and therefore lowering his tax). It's still his. It's not going anywhere. It just gets stuck in an account earmarked for health expenses. It's earning interest. And he can withdraw it for any reason, without penalty, when he hits 65. Bob's breathing a little easier.
One little thing. Just tell Bob or any member of his family not to get sick. OK?
You see, if Bob or one of his family has a health issue, he has to take money from the account to pay the deductible. Once the money's used up, the insurance policy kicks in so he's covered. But if there are no health issues, he gets to keep the money year after year. So Bob should tell his kids to stop their whining. There's nothing a little Motrin can't handle, OK?
Back to the money. If Bob is covering his family he can put away more than $5K each year pre-tax, which is more than a $1,500 tax savings every year. Sweet! And if he's over 50 right now he can "catch up" on contributions too so he's putting money away for health benefits when he gets older and starts wearing diapers.
So here's the summary: HSAs lower health premiums for companies (higher deductibles equal lower premiums). They lower taxes for the participants. They help save money for the future. If a participant dies because he or she didn't want to pay money for a doctor's visit then, hey, blame it on Darwin.
Business owners are going to wake up to this someday. It's too easy to setup. It's too much of a slam dunk. In fact, it's estimated that there will be more than $75 billion invested in HSAs by 2010. Ka-ching! Don't want to go into this line of business yet? Fair enough. But at the very least, you may want to make it a point to investigate HSAs. It's the penny pinching kind of thing to do. But please, don't cough near me. I don't want to have to pay for a doctor's visit either!