Health Savings Accounts (HSAs) are valuable for managing healthcare costs, offering tax advantages and long-term savings opportunities. As a health insurance broker in California, you can leverage HSAs to build relationships with qualified* Certified Public Accountants (CPAs) and financial professionals (wealth management, advisors, financial institutions, etc.) who advise their clients on financial matters. Here is a guide on effectively selling HSAs to CPAs and financial professionals in California.
1. Understand the Benefits of HSAs
Just because a CPA or financial professional may have a strong understanding of finances and taxes does not mean they understand the full benefits of HSAs.
Before you approach these clients, ensure you have a comprehensive understanding of HSAs and the benefits they can provide:
*Tax Advantages: Contributions to HSAs are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses. This means money can be earned (income), invested (investment returns), and used to pay expenses without ever being taxed.
*One way to look at the HSA tax advantage:
Example: An HSA subscriber in the 25% tax bracket is enrolled in a $2000 deductible qualified HDHP. Since they pay the deductible with pre-tax dollars, the $2000 deductible would be comparable to a $1500 non-HSA deductible plan. The tax-preferred effect (savings) continues beyond the deductible, all the way up to their out-of-pocket maximum. An $8,000 OOP max would behave like a $6,000 OOP max in a non-HSA plan.
*Cost Savings: HSAs are paired with qualified high-deductible health plans (HDHPs), which typically have lower premiums than comparable non-HSA plans.
*Tax-free Investment Returns: HSA funds can be invested, growing into a retirement nest egg similar to a 401K or IRA, except there are no Required Minimum Distributions, and you do not pay tax on the investment earnings when you use the money for qualified health care expenses.
*Flexibility and Ownership: The employee owns HSA funds and stays with them throughout their career (from job to job) and into retirement. There are no use-it-or-lose-it provisions like FSA’s.
Attract and Retain: HSAs have become a valuable tool in today’s tight labor market for employers to attract and retain talent. With no discrimination tests like 401K plans, employers easily add a valuable employee benefit to their benefits package.
Important Note: The tax effects mentioned above are federal taxes. California is one of only two states that do not recognize HSAs. Given this, the benefit from the federal tax effect is typically good enough to make the HSA math work for most companies and employees.
The new California Law, SB 1375, was signed by Governor Brown on September 22, 2018 and will affect many small firm’s group health insurance. SB 1375 changes the Health Insurance Code to reclassify certain small employer groups as individuals. The affected firms will have to obtain individual health insurance in 2019, rather than the small employer group plans they currently have. Individual health insurance is typically more expensive with less provider network and benefit plan choices than small group plan offerings.