Create a Group Plan

Canadian IT professionals who move to the US to start their own business are in the fortunate position of being able to create their own group health insurance plan. However, in some cases, it may be more advantageous to purchase private health insurance on an individual basis. There are a variety of pros and cons to consider when making the decision to either set up a company plan or to enroll in a private health insurance plan.

As always, tax is a primary consideration. There are many tax benefits available to small business owners who set up their own group insurance plan. For example, certain small businesses that provide employees with a health care plan through the Small Business Health Options Program Marketplace can take advantage of the small business health care tax credit.

In addition, small business owners can deduct health insurance expenses from income tax owing; for instance, the portion that an employer pays for their employees’ monthly health care premiums are typically classified as business expenses and eligible for tax deductions. Note that tax benefits of group health insurance plans can vary depending on the type of business entity you establish in the US, so it’s best to weigh the pros and cons of establishing a group plan once you are clear on the type of structure your US business will have.

Health Savings Accounts (“HSAs”) are also important tools to consider. You can establish an HSA if you choose a high-deductible health insurance plan. Contributions to HSAs are tax-deductible, and the interest earned inside such accounts grows on a tax-deferred basis. Moreover, all HSA withdrawals (including interest earnings) that are used for health care costs are withdrawn on a tax-free basis. Note that HSA contributions can be made only up to a certain annual limit.