A Security Health Plan offers individuals and businesses significant tax benefits, reducing costs and ensuring compliance with U.S. tax regulations. Discover how tax credits, deductions, and savings accounts can help lower healthcare expenses and boost financial efficiency.
A Security Health Plan offers individuals and businesses a way to manage healthcare costs while also benefiting from tax advantages. Understanding these benefits is crucial for maximising savings and ensuring compliance with tax regulations.
The U.S. government provides various incentives to encourage people to maintain health coverage through employer-sponsored plans, individual health plans, and health savings accounts (HSAs).
This article explores the tax benefits associated with a Security Health Plan and how individuals and businesses can take advantage of them.
What is Security Health Plan
Security Health Plan is one of the biggest health maintenance organisations (HMO) in Wisconsin. It is a not-for-profit medical plan that is part of the Marshfield Health Clinic System and provides healthcare services to around 230,000 people.
Security Health Plan offers different types of health plans, along with extra health services. These include wellness resources, a nursing advice hotline, and emergency care available worldwide. People who need financial support can apply for a low-cost HMO plan through the BadgerCare Plus programme.
Employers can choose from different health plan options. Small businesses have access to HMO, EPO, and POS plans, while larger companies can select either HMO or POS plans. There is also an indemnity plan, which is available to businesses of any size.
For those eligible for Medicare, Security Health Plan provides Medicare supplement plans and Medicare Advantage plans, which may include Part D prescription drug coverage. Additionally, the organisation offers a healthcare plan specifically for Wisconsin state employees. Members of Security Health Plan can receive care from a network of doctors across 41 counties.
Security Health Plan of Wisconsin was originally founded as the Greater Marshfield Community Health Plan in 1971. It changed its name to Security Health Plan in 1986. The Marshfield Health Clinic System itself was established in 1916 by a group of doctors under the name Marshfield Clinic. Today, it is one of the largest private group medical practices in the United States, covering 86 different medical specialties.
In the 2014-2015 health insurance rankings by the National Committee for Quality Assurance, Security Health Plan was rated in the top 10 percent for its Medicare, Medicaid, and private health plans. The Marshfield Clinic Research Foundation and Marshfield Clinic Education Foundation also play an important role by carrying out medical research and educational programmes.
Tax benefits for individuals
A Security Health Plan provides many tax benefits for both individuals and businesses. These benefits help lower healthcare costs and reduce tax payments. Understanding these options can help people and employers make better financial decisions.
1. Premium tax credits
The Affordable Care Act (ACA) introduced premium tax credits to help people and families afford a Security Health Plan through the Health Insurance Marketplace. These credits reduce the amount paid for monthly premiums. A person’s eligibility depends on their income and household size. People whose income falls between 100% and 400% of the federal poverty level (FPL) can apply for these tax credits.
Key points:
- Tax credits reduce the amount paid for health insurance premiums.
- They are based on estimated yearly income but may be adjusted when filing tax returns.
- If income changes, the amount of tax credit may need to be repaid or adjusted.
2. Deduction for health insurance premiums
Self-employed individuals can deduct health insurance premiums for themselves, their spouse, and their dependents. This benefit applies even if they do not itemise their tax deductions. It directly reduces taxable income, making it useful for those who run their own businesses.
Key points:
- Available to self-employed individuals who do not have access to an employer-sponsored health plan.
- Covers medical, dental, and long-term care insurance premiums.
- Reduces adjusted gross income (AGI), which may lower overall tax payments.
3. Health savings accounts (HSAs) tax advantages
A Health Savings Account (HSA) is a special savings account for people with a high-deductible health plan (HDHP). Contributions to an HSA are tax-deductible, and the money in the account can be used for medical expenses without paying taxes. The IRS sets contribution limits for HSAs, which are adjusted annually. Individuals and families should ensure contributions stay within these limits to avoid penalties.
Key benefits:
- Contributions are made with pre-tax income, lowering taxable earnings.
- Withdrawals for medical expenses are tax-free.
- The money in the account can be invested and grow tax-free.
4. Flexible Spending Accounts (FSAs) Tax Benefits
A Flexible Spending Account (FSA) is provided by employers and allows employees to set aside pre-tax money for medical expenses. These funds can be used for medical, dental, and vision costs, reducing taxable income.
Key points:
- Contributions are tax-free, lowering adjusted gross income (AGI).
- Employers may also contribute to an employee’s FSA.
- Funds must be used within the plan year, although some plans offer a grace period or a limited rollover option.
Tax benefits for employers
1. Tax deductions for employer contributions
Businesses that provide a Security Health Plan for employees can deduct the cost of premiums from their taxable income. This applies to employer-paid premiums for health, dental, and vision insurance.
Key benefits:
- Lowers taxable income for the business.
- Helps attract and keep employees by offering good health benefits.
- Meets ACA requirements for companies with 50 or more employees.
2. Small business health care tax credit
Small businesses that provide health insurance to employees may qualify for a tax credit. This helps reduce the cost of offering health coverage. This tax credit is available for two years and can significantly lower the cost of providing health coverage for small businesses.
Eligibility criteria:
- The business must have fewer than 25 full-time employees.
- Average wages must be below a certain limit, which changes yearly.
- The employer must pay at least 50% of the employee’s health insurance premiums.
3. Health Reimbursement Arrangements (HRAs) tax advantages
A Health Reimbursement Arrangement (HRA) allows employers to reimburse employees for medical expenses without taxing them. These arrangements can be structured in different ways:
- Qualified Small Employer HRA (QSEHRA): Available for businesses with fewer than 50 employees. Employers can reimburse workers for medical costs tax-free.
- Individual Coverage HRA (ICHRA): Available for businesses of any size. It allows employers to reimburse employees for personal health insurance premiums and medical costs.
Key benefits:
- Employer contributions are tax-deductible.
- Employee reimbursements are tax-free.
- Gives businesses flexibility in designing health benefits for employees.
Additional tax considerations
- Medical expense deductions: Individuals with high medical expenses may be able to deduct some costs if their total medical expenses are more than 7.5% of their adjusted gross income (AGI). This applies to costs not covered by insurance, such as doctor visits, medications, and surgeries.
- COBRA premium payments: Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), people who lose employer-sponsored health coverage can continue their insurance for a limited time. Although COBRA premiums are usually high, they may be tax-deductible if they exceed 7.5% of AGI.
- Tax rules for employer-provided health benefits: Employer-sponsored health plans are not considered part of an employee’s taxable income, making them a valuable benefit. However, very high-cost employer plans may be subject to the “Cadillac Tax” in the future, although this tax has been delayed.
Final thoughts
A Security Health Plan provides valuable tax benefits for both individuals and businesses. These benefits help lower healthcare costs and reduce tax payments. By understanding tax deductions, credits, and savings options, individuals can make informed choices about their health coverage. Employers can also take advantage of tax incentives to provide good health benefits while managing costs. Planning carefully and consulting with tax professionals can help maximise these benefits and ensure compliance with changing tax laws.
Pallavi Singal is the Vice President of Content at ztudium, where she leads innovative content strategies and oversees the development of high-impact editorial initiatives. With a strong background in digital media and a passion for storytelling, Pallavi plays a pivotal role in scaling the content operations for ztudium’s platforms, including Businessabc, Citiesabc, and IntelligentHQ, Wisdomia.ai, MStores, and many others. Her expertise spans content creation, SEO, and digital marketing, driving engagement and growth across multiple channels. Pallavi’s work is characterised by a keen insight into emerging trends in business, technologies like AI, blockchain, metaverse and others, and society, making her a trusted voice in the industry.
