Many Americans cannot afford sufficient health coverage, nor can some small business owners do as much as they'd like to help them out. The healthcare reform law, called the Patient Protection and Affordable Care Act, requires all individuals to carry health insurance and offers premium assistance to help lower-income Americans purchase health insurance through a state or federal online exchange.
While businesses with fewer than 50 employees are not required to offer health insurance under the healthcare reform law, they must notify workers about the requirement to carry health insurance and the availability of the online health insurance exchanges. The notice must also inform employees that they may qualify for premium assistance if their annual incomes are 100 percent to 400 percent of the federal poverty level, which as of 2013, was $11,490 for a single adult and $23,550 for a family of four. (For more on the healthcare reform law, see the article, "The Affordable Care Act.")
Other programs exist to help cover out-of-pocket healthcare expenses.
- Patient assistance programs. A number of major pharmaceutical companies provide free medications to individuals who cannot afford to buy all their medications. Also referred to as medication assistance-, indigent drug- and charitable drug programs, these initiatives are not government-run, so eligibility requirements and benefits vary from provider to provider. For a comprehensive database of these participating companies, visit RxAssist at http://www.rxassist.org .
- Hospital programs. For individuals with high-deductible health plans, many hospital systems offer financial assistance or payment plans to cover the out-of-pocket expenses for an elective surgery or injury. A hospital's patient relations staff can perform a financial analysis and explain the patient's options.
- Government programs. Most states, as well as the District of Columbia, Guam and Puerto Rico, operate programs to help low-income people with their healthcare expenses. Details on each state's program are available online or via local health departments.
- Health savings account (HSA). Created by the Medicare Modernization Act, HSAs help employers lower the cost of providing healthcare, while allowing individuals more control over their care decisions — specifically, over how they apply their benefits.
HSAs offer tax incentives to business owners, too. While a HSA isn't a "health insurance plan," per se, the employer incurs no costs for offering an HSA, other than those associated with managing it.
Here's how these plans work: Health savings accounts allow taxpayers to put aside pre-tax money to pay for future medical costs. To qualify, participants must be enrolled in a High Deductible Health Plan (HDHP). Individuals or employers then make the pretax contributions to the accounts.
Under the healthcare reform law, HSAs combined with an HDHP are still permitted as long as the combined benefits cover at least 60 percent of the individual's healthcare expenses.
Withdrawals from HSAs are tax-free, provided the funds are used for qualified health expenses, including deductibles and costs not covered under the medical plan portion. Advance notice of withdrawals isn't required, but the method of getting hold of the cash, check, debit card or other means varies by HSA. Unlike a flexible spending account (FSA), unused money in HSAs is not forfeited at year's end, but continues to grow without tax liability.
Since individuals own their HSAs, the savings move with them as jobs change, even into retirement. In fact, individuals age 65 or older do not incur penalties for withdrawing funds. In the event of the holder's death, the account can be transferred to a beneficiary — tax-free for spouses.