Consider a Health Savings Account

Do you think health insurance is beyond your means? Think again. In 2003, Congress passed legislation to create health savings accounts. These policies are directly available to self-insured teachers or to studio owners, especially those not currently offering health coverage to their full- or part-time employees.

If you haven’t heard of HSAs, listen up. These plans were legislated specifically for small businesses that simply can’t afford to cover their employees. While the wave of marketing would have you believe that HSAs are the cure-all to your insurance problem, the decision to offer or alter your insurance coverage hangs on a number of issues. Read on for the pros and cons of this new approach to managing medical expenses.

HSA Basics
An HSA is comprised of two parts: a savings account and an insurance policy administered by a traditional insurance company. To understand how HSAs work, it helps to think about IRAs or 401ks. HSAs are designed to do for health care spending what IRAs and 401ks do for retirement savings—relieve employers of some of their financial burden and provide individuals with a tax-advantaged incentive to assume more responsibility and control over how much money they save for future expenses—in this case, exactly how and when that money is spent during their lifetimes.

The first component is a tax-advantaged savings account similar to an IRA, to which pre-tax dollars may be contributed regardless of your earned income (during 2005, up to $2,650 may be contributed for individual accounts; $5,250 for family coverage). This money may be withdrawn tax-free as needed throughout the year to pay for medical expenses. The unspent amount is rolled into the following year. Because this account builds tax-free balances over one’s lifetime, there is an advantage to keeping medical expenses low in order to accumulate a nest egg for use later in life, when most medical expenses are incurred.

The second part of the HSA is the insurance policy itself. Basically, this is an insurance plan, and some HSAs are even HMOs or PPOs. The difference is HSAs have deductibles of at least $1,000 for single coverage and $2,000 for family coverage. This means the insured is responsible for paying the first $1,000 ($2,000 for a family policy) of medical expenses incurred each year before the insurance begins to pick up the tab.

These deductibles are substantially higher than what most people are used to. The Kaiser Family Foundation estimates the average deductible for a conventional employer-provided insurance plan at roughly $400 for individual coverage, $894 for families. So, if you are currently covered by a traditional policy through your or your spouse’s employer, shifting to an HSA can significantly raise out-of-pocket costs if you incur higher medical services needs—like a broken leg or pregnancy for example—in any given year. Keep in mind that many plans will cover all or most preventive services before the high deductible is met. These covered services may include annual exams, immunizations, screening tests and routine prenatal and well-child care.

For Studio Owners
If you’re a studio owner who offers traditional insurance and is considering the switch to HSAs, you may want to contribute an amount to your employees’ HSA to make the switch more palatable. This would help offset what your employees potentially face in the form of the higher deductible. Also, all of your contributions to the HSA are deductible and free of payroll taxes.

The downside is that this amount becomes your employees’ money. If they leave, they leave with the cash contribution. The insurance policy portion of the HSA may be extended, but the savings portion is entirely a personal asset.

Yet you will exchange added responsibility and potentially higher expenses for a drastically lower annual premium, or the actual cost of the insurance policy. According to Gary Oslowski, a vice president at Aetna Insurance, the studio owner can expect to cut premiums in half by offering HSAs. That low annual cost is an attention grabber for employers and the working uninsured because it makes offering or extending coverage to part-time employees more affordable.

How excited should you get? Evaluating HSA plans should be a relatively easy calculation for employers to make: you need to compare current costs, or available budget for a new policy, to an HSA plan’s projected costs. Then, consider the utilization rates, that is, how much employees actually use medical services—which are the other key component of an employer’s health insurance cost. By shifting more responsibility for the expense of health services to the consumers, these rates will drop, resulting in further cost savings for employers.

Under the HSA scenario, employees must pay the first $1,000 or so of bills. They are more likely to spend their dollars with greater care, because they have the incentive of seeing their savings account balances grow. So far, studies indicate, employees do spend less with HSAs. And to ensure that happens, firms like Aetna provide their clients with tools to help them comparison shop for their prescriptions and other medical services.

For Teachers
While switching to or instituting an HSA plan can make economic sense for employers, what about part-timers, independent contractors or anyone else who may want to self-insure?

If you are self-insured and have a high-deductible health care policy, you would gain access to the tax-advantaged savings plan and be able to use pre-tax dollars to pay for medical expenses and stash away extra dollars toward future expenses. If you are also self-insured, you will benefit from lower premiums.

If you are uninsured, this option has the potential to raise your out-of-pocket expenses, especially if you never spend money on health care. But if you do have medical expenses, you are always paying full price for services. By accessing an HSA, no matter where or how much you work, you will be covered by insurance and limit the amount you are responsible for in a single year. Having access to the savings portion of the HSA would also make it that much easier to pay future expenses.

The Bottom Line
The actual cost of an HSA is hard to predict. Despite the low premiums, there is the potential responsibility for co-payments and expenses incurred before the deductible is met. And each plan has a variety of features and is structured differently, so shop around before you commit.

The younger and healthier you are, the more attractive the HSA is—low premiums plus a low probability that you will spend much on your medical care makes it look like a good bet. It is certainly a better bet than remaining uninsured.

And though they are far from a panacea for what ails the U.S. health care system, HSAs may offer significant relief over other plans and make health care more affordable for both studio owners and teachers. DT


Gayle B. Ronan is a Chicago-based freelance writer of financial, investment, business management and tax-related articles. Her work has appeared in
Bloomberg WealthManager, TICKER Magazine and on CNBC.com.

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Studio Owners
Courtesy Tonawanda Dance Arts

If you're considering starting a summer program this year, you're likely not alone. Summer camp and class options are a tried-and-true method for paying your overhead costs past June—and, done well, could be a vehicle for making up for lost 2020 profits.

Plus, they might take on extra appeal for your studio families this year. Those struggling financially due to the pandemic will be in search of an affordable local programming option rather than an expensive, out-of-town intensive. And with summer travel still likely in question this spring as July and August plans are being made, your studio's local summer training option remains a safe bet.

The keys to profitable summer programming? Figuring out what type of structure will appeal most to your studio clientele, keeping start-up costs low—and, ideally, converting new summer students into new year-round students.


Find a formula that works for your studio

For Melanie Boniszewski, owner of Tonawanda Dance Arts in upstate New York, the answer to profitable summer programming lies in drop-in classes.

"We're in a cold-weather climate, so summer is actually really hard to attract people—everyone wants to be outside, and no one wants to commit to a full season," she says.

Tonawanda Dance Arts offers a children's program in which every class is à la carte: 30-minute, $15 drop-in classes are offered approximately two times a week in the evenings, over six weeks, for different age groups. And two years ago, she created her Stay Strong All Summer Long program for older students, which offers 12 classes throughout the summer and a four-day summer camp. Students don't know what type of class they're attending until they show up. "If you say you're going to do a hip-hop class, you could get 30 kids, but if you do ballet, it could be only 10," she says. "We tell them to bring all of their shoes and be ready for anything."

Start-up costs are minimal—just payroll and advertising (which she starts in April). For older age groups, Boniszewski focuses on bringing in her studio clientele, rather than marketing externally. In the 1- to 6-year-old age group, though, around 50 percent of summer students tend to be new ones—98 percent of whom she's been able to convert to year-round classes.

A group of elementary school aged- girls stands in around a dance studio. A teacher, a young black man, stands in front of the studio, talking to them

An East County Performing Arts Center summer class from several years ago. Photo courtesy ECPAC

East County Performing Arts Center owner Nina Koch knows that themed, weeklong camps are the way to go for younger dancers, as her Brentwood, California students are on a modified year-round academic school calendar, and parents are usually looking for short-term daycare solutions to fill their abbreviated summer break.

Koch keeps her weekly camps light on dance: "When we do our advertising for Frozen Friends camp, for example, it's: 'Come dance, tumble, play games, craft and have fun!'"

Though Koch treats her campers as studio-year enrollment leads, she acknowledges that these weeklong camps naturally function as a way for families who aren't ready for a long-term commitment to still participate in dance. "Those who aren't enrolled for the full season will be put into a sales nurture campaign," she says. "We do see a lot of campers come to subsequent camps, including our one-day camps that we hold once a month throughout our regular season."

Serve your serious dancers

One dilemma studio owners may face: what to do about your most serious dancers, who may be juggling outside intensives with any summer programming that you offer.

Consider making their participation flexible. For Boniszweski's summer program, competitive dancers must take six of the 12 classes offered over a six-week period, as well as the four-day summer camp, which takes place in mid-August. "This past summer, because of COVID, they paid for six but were able to take all 12 if they wanted," she says. "Lots of people took advantage of that."

For Koch, it didn't make sense to require her intensive dancers to participate in summer programming, partly because she earned more revenue catering to younger students and partly because her older students often made outside summer-training plans. "That's how you build a well-rounded dancer—you want them to go off and get experience from teachers you might not be able to bring in," she says.

Another option: Offering private lessons. Your more serious dancers can take advantage of flexible one-on-one training, and you can charge higher fees for individualized instruction. Consider including a financial incentive to get this kind of programming up and running. "Five years ago, we saw that some kids were asking for private lessons, so we created packages: If you bought five lessons, you'd get one for free—to get people in the door," says Boniszewksi. "After two years, once that program took off, we got rid of the discount. People will sign up for as many as 12 private lessons."

A large group of students stretch in a convention-style space with large windows. They follow a teacher at the front of the room in leaning over their right leg for a hamstring stretch

Koch's summer convention experience several years ago. Photo courtesy East County Performing Arts Center

Bring the (big) opportunities to your students

If you do decide to target older, more serious dancers for your summer programming, you may need to inject some dance glamour to compete with fancier outside intensives.

Bring dancers opportunities they wouldn't have as often during the school year. For Boniszewski, that means offering virtual master classes with big-name teachers, like Misha Gabriel and Briar Nolet. For Koch, it's bringing the full convention experience to her students—and opening it up to the community at large. In past years, she's rented her local community center for a weekend-long in-house convention and brought in professional ballet, jazz, musical theater and contemporary guest teachers.

In 2019, the convention was "nicely profitable" while still an affordable $180 per student, and attracted 120 dancers, a mix of her dancers and dancers from other studios. "It was less expensive than going to a big national convention, because parents didn't have to worry about lodging or travel," Koch says. "We wanted it to be financially attainable for families to experience something like this in our sleepy little town."

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