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Small Business

Finding the best small business health insurance: a how to guide

Some characteristics of the best small business health insurance companies include good customer service, the best prices, the best customizable plans, and the best networks. In addition, many small business owners provide their employees with health insurance to attract and retain good talent. But when searching for health coverage plans, many employers ask – what's the best small business health insurance? 

 

How much does small business health insurance cost? And is it the best way to provide health benefits for employees? And we have answers! If you want to attract and retain talent, provide great health coverage options at the best price, with customizable plans of the employees choice, it’s time to think outside of the traditional health insurance box and consider a health reimbursement arrangement (HRA) for your small business. When it comes to the best small business health insurance, an HRA checks all the boxes. 

Small business health insurance options

Group health insurance for small business

While traditional group health insurance is the most understood health benefit for employees, it’s not the only one, and it’s not always the best health insurance for small businesses. 

Group plans for small business health insurance have many drawbacks. They are expensive, one-size-fits-all, require minimum participation rates, and are financially unpredictable. However, monthly premium amounts can be out of reach for small employers with limited budgets.

Additionally, minimum participation requirements leave most small organizations with only one or two policies. As a result, many employees may not get the policy they want, or their healthcare needs may need to be covered.

Self-funded insurance plans for small business

This type of health insurance for business owners means employers assume the financial risk of providing healthcare to employees. So the employer pays for each claim directly, rather than a fixed cost like premiums to the insurance company.

Employers are attracted to this type of medical insurance for small companies because it can allow for personalization (something employees want), isn't subject to federal or state premium taxes, and seemingly keeps healthcare costs down.

However, there are many drawbacks, so this may not be the best health insurance for small businesses. For example, self-funded insurance plans can be complex to administer, and extensive claims can make them more long-term costly. 

Ready to learn how much you can reduce benefits cost?

Health reimbursement arrangements for small business

An HRA is an employer-funded health benefit used to reimburse employees for qualified medical expenses that may even include health insurance premiums. HRAs provide a tax benefit to the employer and employee. HRAs are not health insurance, and we mean this in a good way. HRAs provide your small business with all the benefits you love from traditional small business group plans without all drawbacks.

HRAs are an excellent way for small businesses to offer employees personalized and flexible health benefits to pay for specific healthcare services that meet their individual needs. They're an incredibly cost-effective option for employers that can't afford small business health insurance plans

Two popular HRAs for small business owners

  1. Qualified Small Employer HRA (QSEHRA) A company-funded health benefit that reimburses employees for qualified medical expenses.
  2. Individual Coverage HRA (ICHRA): Businesses of all sizes can use ICHRA — including non-profits and churches — to reimburse employees tax-free for the cost of their health insurance premiums and other healthcare expenses. 

An HRA gives employers flexibility and empowers employees to take charge of their health insurance plans.

What’s the best small business health insurance? 

For many reasons (namely employer and employee satisfaction), HRAs are the best option for small business health insurance. While not technically insurance, HRAs provide all you need to give your employees the assurance they want.

Let’s dig in to the two main types of HRAs a bit more. QSEHRA and ICHRA are the health benefits plans Take Command offers. 

ICHRA: the individual coverage HRA reimburses employees for insurance rather than buying it for them. It also brings a design feature that allows owners to scale benefits by class.

  • It offers the most flexibility and is a top choice for businesses with a mixed workforce. There are 11 ICHRA employee classes (categories of employees), and the employer can choose how much to reimburse each class. For example, full-time vs. part-time employees, seasonal employees, and salaried vs. non-salaried employees can each have a different reimbursement arrangement.
  • ICHRA works for companies of any size, from start-ups to large companies.
  • There are no reimbursement limits.
  • You can combine ICHRA with a group plan.

Ask our experts which HRA is best for your business

QSEHRA: the qualified small employer HRA (sometimes called a small business HRA) allows small employers to set aside a fixed amount of money each month that employees can use to purchase individual health insurance or use on medical expenses, tax-free.

  • Perfect fit for small businesses because it works for those with fewer than 50 employees.
  • There are QSEHRA contribution limits. For 2023, businesses with less than 50 employees can contribute a maximum of $5,850 for individual employees (this adds up to $487.50 per month) and a contribution of $11,800 for employees with a family (this adds up to $983.33 per month).
  • It can’t be combined with a group plan.
  • Unlike ICHRA, QSEHRA reimbursements must be the same for everyone, but you can vary by age and family size.

With an HRA, you can remove the headache of traditional business-offered health insurance plans and put the power back into the hands of your team by providing reimbursements for qualified health care expenses.

If you want to dive deeper into ICHRA and QSEHRA, we have comprehensive guides (here and here), and FAQ pages (here and here).

How to set up an HRA for small business

There are many positive benefits to HRA accounts for employers and employees alike, including saving you money, time, and stress! In addition, these tax-advantaged tools are customizable and protect your business from the rising costs associated with group plan premiums.

Are you ready to learn more or ready to make a switch? Setting up an HRA is easy, especially if you have a skilled administrator like Take Command. Here's what you need to know about setting up an HRA for small businesses.  

  1. Pick the type of HRA that works best for your small business
    Talk with your experienced HRA administrator to answer questions about which HRA plan is best for you and select the one that fits your needs. QSEHRA is only available for employers with less than 50 full-time employees. An ICHRA can scale for any size of the employer. You can administer the HRA yourself (note: not recommended!) or hire a third party to administer, like Take Command.
  2. Design the HRA plan
    This is the exciting part! First, employers need to determine eligible employees. For an ICHRA, the employer must set up classes based on employee types like employment status or geography. Then the employer will choose the allowance for each category. Next, determine which expenses you will reimburse, such as health insurance premiums or insurance premiums and eligible medical costs.
  3. Select a start date for your HRA
    Once an employer decides to offer an HRA, they need to pick a start date. They do not have to be tired to open enrollment. The implementation triggers a particular enrollment period so employees can find plans outside of open enrollment dates on the individual market. 
  4. Draft legal documents 
    Once you decide on a start date, get all your legal documents in order and set up a process to run your QSEHRA. This is where an HRA administrator can be super helpful. They'll take care of all the processes and legal work and ensure it goes smoothly. This is important since failure to comply with the IRS and Department of Labor rules will result in hefty penalties. 
  5. Educate employees about the new HRA benefits
    Employees need to know how to use their new HRA, and there’s a lot of information to cover. When you work with an experienced HRA administrator like Take Command, we’ll handle your employee onboarding and ensure they fully understand how to use their HRA. We’ll even help them shop for individual health insurance plans.

Here's our guide on How to Set up an HRA if you want some extra reading. 

A better way to offer the best small business health insurance 

Let us take this off your plate so you can save time and money while supporting your employees' health and well-being with an HRA for your businesses. To get started, check out our HRA administration platform demo and find out how this intuitive platform can manage your HRA administration.

Ask our experts how to get started today (it's easy!)

Small Business