The coronavirus pandemic continues to impact the country's businesses and workers significantly. As a result, remote work and hybrid arrangements are gaining a stronger foothold, causing a massive shift in the economy and healthcare. Employers are still the most common source of health insurance in the U.S. (though just over 50%, according to Census reports), but this outdated model is rapidly losing its luster.
Alternatives to Group Health Insurance
Many small business owners feel frustrated by the costs of group health insurance or find it Many small business owners feel frustrated by group health insurance costs or find it difficult to meet participation requirements because traditional health insurance coverage doesn't fit the new workforce. If you’re a business owner (or self-employed) and your company consists of remote workers, seasonal, hourly or part-time workers, you’re likely on the hunt for alternatives to group health insurance. Take Command is here to help you!
What Are My Options Besides Group Health Insurance?
Traditional group health insurance has a lot of drawbacks for business owners. It can be expensive with pricey yearly renewals and doesn’t offer the flexibility modern business owners need – the ability to work with a remote and mixed workforce. These obstacles send business owners looking for alternatives to group health insurance. So what options are there besides the traditional group health insurance route?
1. Don’t offer any health benefits. While technically legal (if you have 50 or fewer full-time employees), we don’t advise this if you want to attract and keep good talent. There will always be another company that offers health benefits, so make sure you’re not missing out on great team members by choosing not to offer coverage.
- Gives employees funds for health coverage: No
- Offers a tax advantage for your business: No
2. Offer health stipends. This option lets you provide some health benefits, but your business has no tax advantage. Employees get a fixed, taxable stipend to purchase the individual health insurance plan of their choice and use it on out-of-pocket expenses. But there is no tax advantage for your business.
- Gives employees funds for health coverage: Yes
- Offers a tax advantage for your business: No
3. Increase employee salaries. When you dig deeper into what this entails, it’s not as attractive as it sounds. When you increase employee salaries, you and your employees take a tax hit – more payroll taxes for you and more income taxes for them. So a portion of that extra cash goes to income taxes.
- Gives employees funds for health coverage: Yes…but part is lost to income taxes
- Offers a tax advantage for your business: No…more like a tax disadvantage
4. Offer a Health Reimbursement Arrangement. A health reimbursement arrangement is an affordable, tax-advantaged alternative to traditional insurance where employers reimburse their employees for individual insurance premiums and medical expenses (if applicable). HRA coverage is done on a pre-tax basis.
- Gives employees funds for health coverage: Yes
- Offers a tax advantage for your business: Yes
→ Check out our 5 tips for choosing a small employer health insurance plan
→ Compare QSEHRA vs ICHRA to see what's best for you.
Health Insurance Alternatives For Self-Employed
If you’re self-employed, you are the business owner, which means you’re responsible for getting your own health coverage and health benefit, and company group coverage isn’t an option.
So what are health insurance alternatives for the self-employed?
1. Health insurance marketplace. Thanks to the Affordable Care Act (ACA), people who don’t have employer-sponsored health insurance plans can find affordable individual health coverage plans, like Blue Cross health insurance self-employed. Our individual health insurance platform can help you shop for the best plan for you.
2. Health care sharing ministries (HCSMs) are cost-sharing membership groups available to people who share religion or ethical beliefs. Members pay monthly dues (like a premium) that cover medical costs for other members. These can be tricky since it’s not an insurance plan, they’re not required to pay out anything, and they’re not required to follow (ACA) mandates. Read our CEO's review of Medi-share here.
3. A health reimbursement arrangement is an affordable, tax-advantaged alternative to traditional insurance where employers reimburse their employees for individual insurance premiums and medical expenses (if applicable) on a pre-tax basis.
Check out our brand new small business health insurance guide to dive deep into these ideas.
Bonus! You can reimburse employees who have both an individual and medicare plan. Through your HRA, you can reimburse medicare premiums for medicare-eligible employees. Read more about that process here and how Take Command can help you.
Self-employed ICHRA Insurance
If none of the above health insurance alternatives for self-employed work for your specific situation, you may qualify for an even better option – an HRA for self-employed. This is a great affordable health insurance alternative for self-employed people. For a business owner to participate in an HRA, they must be considered an employee of the business and depends on how the plan and business are set up. These are some common ways companies are set up and what that means for HRA eligibility.
- C- Corps are legal entities separate from the business owners. Under a C-corporation, the business owner and dependents can utilize an HRA!
- S- Corps prevents businesses from taxing by passing any profits and losses through shareholders' income tax returns. Because of this setup, an S-Corp owner who owns more than 2% of the company is considered self-employed, not an employee, which means they can't participate in an HRA.
- Partnerships also are not subject to income tax. Partners are directly taxed, making them self-employed and not eligible for participation. The Loophole: if the partner’s spouse is a W-2 employee (and not a partner spouse) then the owner can participate in the HRA as a dependent of the spouse.
- Sole-Proprietorships are unincorporated businesses owned and operated by one individual with no distinction between the business and owner. The owner is not an employee and will not qualify for the HRA unless their spouse is a W-2 employee; then the owner can access the HRA as a dependent of the spouse (for QSEHRA only).
“As a self-employed individual, you generally are not eligible for an HRA because you’re not an employee; your spouse can be an employee and eligible for an HRA and health plan that covers you.”
- Even though you're self-employed and can't directly qualify for an HRA, you can still take advantage of everything an HRA offers. Here’s how to make an HRA work for you if you’re self-employed (and have no employees other than yourself) and married.
- Hire your spouse as a W-2 employee.
- Make your spouse the primary member of your family health plan.
- Cover yourself as a dependent on your spouse’s major medical health plan.
- Set up a One-Person 105 HRA, ICHRA, or QSEHRA for your spouse.
- Save all your medical bills and records and have your company reimburse the bills each month from a separate account.
- If you’re self-employed with no employees and you’re married, this post walks you through the steps you can take to participate in an HRA.
Please note: This strategy only works if you don’t hire any other W-2 employees that would be eligible for either ICHRA, QSEHRA or a One-Person 105 HRA (make sure to look at those rules closely) and assumes that you and your spouse don’t own any other businesses that have employees (common ownership rules would likely apply and the plan would fail to meet Section 105 requirements). And remember to keep good records!
Take Command can help with ICHRA for the self-employed!
We’re ready to chat on our site if you have specific questions about your business and how HRAs could help. Setting up an ICHRA is simple and quick, and our team is here to help if you need it. You should also check out this amazing guide to learn everything you need to know about individual coverage HRAs. And we have resources available to you specifically for small business owners so you can learn all about ICHRA; think of this as your ICHRA for dummies guide! Learn more about details like administration costs, how to set up your HRA, ICHRA rules 2022, ICHRA vs group plan and ICHRA vs QSEHRA for your small business or self-employed plans.
When is open enrollment for health insurance 2023? Open enrollment starts November 1 so hop over to our handy tool to help you navigate the healthcare marketplace, and check out our open enrollment resource guide.
Health Insurance Alternatives 2023
As we enter open enrollment season and you're browsing the healthcare marketplace on healthcare.gov or considering health insurance alternatives, keep in mind that you have options regarding healthcare coverage.
Our team can help you decide what type of health insurance alternative is best for you and your business – whether it's a health care sharing ministry or health reimbursement arrangement – with our step-by-step tools and resources to help you find the best fit.
Susanne is a copywriter specializing in the health and wellness industry. Before starting her own business, she spent nearly a decade at a marketing agency doing all of the things – advisor, copywriter, SEO strategist, social media specialist, and project manager. That experience gives her a unique understanding of how the consumer-focused content she writes flows into each marketing piece. Susanne lives in Oklahoma City with her husband and two daughters. She loves being outdoors, exercising and reading.