It’s worth taking a look at why your small business should feel confident choosing a Health Spending Account (HSA) to pay for medical expenses.
Here's 5 reasons why a HSA is a better option than a traditional health insurance plan.
Here is a table to summarize the key differences between a HSA and insurance.
Below, I will expand on each specific point:
1. Premium Creep
Traditional Insurance Plan
- Monthly premium for coverage regardless of access or usage to the plan
- Monthly premium rate often increased at the annual renewal of the policy (premium creep)
- Age of the individual will affect the price of your plan
HSA
- Avoid a premium creep due to usage or age factors
- Most Health Spending Accounts have fixed fee as opposed to a premium
- Pay for the expenses you incur, eliminating a situation where you have paid into a program that you did not use.
2. Eligible Expenses and Pre-Exisiting Conditions
Traditional Insurance Plan
- Eligible medical expenses are restricted
- Items that you wish to claim under this policy may be restricted by an annual or life time maximum or require special authorization in order to obtain eligibility.
- At time of enrollment, medical history will be requested and pre-existing conditions may be excluded or reduced from coverage.
HSA
- Expenses are not restricted by type of expense, only on the dollar amount
- You will have access to a wider range of eligible expenses
- Will not restrict or limit benefits due to a pre-existing medical condition.
3. Complexity
Traditional Insurance Plan
- Under a fully insured program, you will receive a plan booklet outlining the items that are covered and also the ones restricted or excluded by definition, co-insurance, deductibles or fee guides. Figuring out what your coverage is and if it will be reimbursed partially or in full can get complicated.
HSA
- A Health Spending Account is typically only restricted by dollar amount. You will have 100% coverage for all eligible expenses up to your spending account limit. Your account balance is updated by the administrator every time a claim is processed, eliminating the need to keep track of this information manually.
4. Deductibles
Traditional Insurance Plan
- Your benefits may be restricted by an annual single/family deductible
- Benefits can be restricted by a co-insurance of 50%-80%
- There is a limit for the number of visits and treatments.
HSA
- No deductible
- You are not restricted by co-insurance
- No limits for the number of visits and treatments
5. Claims
A Health Spending Account with a digital claim platform will process your claim within 24 hours versus many traditional insurance claims that can take several weeks to process.
A Health Spending Account (HSA) is a tax plan and affordable alternative to traditional health insurance. It turns your after-tax personal expenses into before-tax business deductibles.
To learn whether an HSA is right for you, read our:
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