FOCUS | ISSUE 6 | 2010

3 Acronyms = 3 Strategies for your practice

in the midst of healthcare reform issues Some of these have been available for years, but are you making use of them?

H

ealthcare Reform has been charac- terized as the most sweeping legisla- tion to come along in years. It has

been the subject of many jokes, either because of its political origin or perhaps because it seems that’s the way America tends to deal with some of its diffi cult problems. But I assure you, this is no laughing matter.

As of July 31, 2010 we are facing 3,833 pages of new regulations and $569.2 billion in tax increases. For most dental professionals the greatest impact will be personally, for you and your family, or as an employer, with regard to employees and the impact on them and their families. The wellbeing of your practice is de- termined by the entire dental team, so in either instance, there is much at stake.

When problems surface, one of MDIS’ fi rst reactions is to see what is available as a solu- tion. Health Insurance and health care costs are going to continue to increase due in part to Healthcare Reform. While there is hope for repeal, or at least a modifi cation of some of the measures, the truth is no one really knows how things will end up. Regardless of that outcome, here are some solutions that make health insurance more affordable and usable: an HRA, HSA or FSA. Some of these have been available for years, but are you making use of them?

1. HSA (HEALTH SAVINGS ACCOUNT)

Formerly known as a Medical Savings Account, it is one of the easiest ways to control health insurance and healthcare costs. These accounts are perfect for a dental professional as well as many others.

After obtaining qualifying health insurance called a high deductible health plan (at least $1,200 deductible) an individual may deposit up to $3,050 into a tax deductible, health savings account. A family may deposit and deduct up to $6,150, and for individuals age 55 or older, they may make an additional $1,000

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catch-up contribution. These deposits grow on a tax-exempt basis and then can be used to pay for out-of-pocket medical expenses with pretax dollars. It is like getting a 30 to 40 percent discount on your healthcare expenses. Most dentists are considered self-employed, and thus, also can take a tax deduction for the health insurance premium. The HSA is 100 percent vested and is treated much in the same way as an IRA. Fully funding the HSA, regardless of actual health expenses, is the best way to maximize your advantage. Many are building a nice reserve to take with them into retirement. You really should have one.

2. FSA (FLEXIBLE SPENDING ACCOUNT)

A voluntary plan funded by employees that is a part of a Cafeteria Plan. This type of account was more commonly provided as a benefi t by large employers, however, many small employers are learning how easy it is to help employees’ and their families pay for out-of-pocket medical expenses such as the deductible and co-insurance on a pretax basis. This is possible even when the employer does not provide a health insurance benefi t.

On an annual basis, an employee estimates what their out-of-pocket healthcare expenses might be for the year and then equal deduc- tions from each paycheck are withheld to be available to pay for those expenses when they occur. Additional benefi ts of a cafeteria plan are that it also can pay for insurance premiums and childcare on a pre-tax basis. Again, it is like getting a 30 to 40 percent discount on quali- fi ed expenses. Plus, there is a bonus for the em- ployer: Money used in an FSA or cafeteria plan is federal, state and social security tax exempt, so for every dollar an employee pre-taxes, the employer avoids paying 7.65 percent on their half of the payroll tax. The FSA also may be used to pay for dental care and is authorized by Section 125 of the IRS code.

3. HRA (HEALTH REIMBURSEMENT ARRANGEMENT)

Most fl exible of the three different tax- favored plans presented because it is totally designed and funded by the employer. The plans exist for the benefi t and welfare of em- ployees and families. They may be as extensive or as restricted as the employer desires. They may include benefi ts for premiums, out-of- pocket expenses for health, vision and dental, or wellness programs like a gym membership to promote healthy behavior.

You may wish to consider saving premium dollars on a health plan by raising the deduct- ible and then paying for a portion of the deductible with an HRA. Additional savings are realized because not every employee has the same health care expenses. Only the ones who qualify receive a reimbursement. The HRA concept may be utilized by specifying a dollar amount or specifying certain healthcare procedures and benefi ts. It also may be used in conjunction with a FSA and Cafeteria Plan. The employer costs of an HRA are authorized under Section 105 of the IRS code and are not taxable benefi ts to the employees.

There are certain guidelines of the FSA and HRA that may limit the use of these tools for an employer’s personal use. However, setup costs are minimal and administration may be done in-house or contracted. Despite the many new problems posed by Healthcare Reform, these ideas are effective solutions to deal with the ever-increasing costs of employee benefi ts and healthcare for you and your family. We encourage you to consult MDIS for informa- tion. Besides providing insurance products and services, MDIS is a resource that cares about your problems and is dedicated to serving dental professionals.

Visit www.mdis4dds.com for resources or contact us to discuss a solution for your situation (800- 944-7550 or greg@mdis4dds.com). This article is intended for informational purposes and should not be construed as tax or legal advice.