Thursday, November 11, 2010

What kind of affordable health insurance plan is there for small business owners?

I have a friend who is in the process of moving to Tx and is looking to start his own business but is hesitant because he has a wife and two kids and does not know what to do regarding health insurance.
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One of the best options to consider are health savings accounts. They combine a high-deductible health plan (HDHP) with a cash savings account which is investible in almost any kind of investment. You use the cash (which is put in, builds and spent tax free so long as it is on medical expenses) to pay off your medical expenses until you hit the deductible and then the health plan pays, except that routine care like doctor visits, etc. are covered first dollar by the health plan. As a small business there are tax advantages to the business for doing this and as an employee you get tax advantages and the ability to use the cash for whatever you want (up to 65 as long as you pay the tax when you take it out....after 65 it is like an IRA where you pay your post retirement tax bracket rate on withdrawls). You have to be diligent about funding the cash portion, but treat that part like an IRA account that you plan to build up and use for retirement.
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