Health care for small business is a common concern for small business owners. After all, offering small business health benefits helps with recruitment and retention and takes care of employees. Making a small business health insurance decision, however, can be quite daunting. There are so many options, and most of them seem expensive and cumbersome. Happily, there are two new ways to offer health care for small business that are superior to the rest. Read on for more!
With the Great Resignation still in full swing, it's important to not lose employees that are crucial to your business. Small business health insurance can help with that, and they come in the form of health reimbursement arrangements called QSEHRA and ICHRA.
Did you know that more than half of the US working population has left a job for better benefits packages elsewhere?
What are my options for health care for small business?
If you have less than 50 employees, you can technically not offer anything, since you aren't subject to the employer mandate. This isn't advisable, however, given that we're currently in a (very) competitive job market, health insurance is more important than ever, and small businesses have their hands full trying to rebound from the affects of the pandemic. Plus, taking care of your employees is simply the right thing to do.
In 2018, 29.8% of employers with fewer than 50 employees offered a small group insurance plan to at least some of their employees.
If you've done any Google searching for "health care for small business" or "small business health insurance options," you've probably seen the thousands of results that don't seem quite right for your own business.
These might include:
Small group health insurance
When asked about health insurance, most people envision the model of small-group insurance (sometimes referred to as “fully funded”). That’s because it’s the model of insurance with which most people have experience. While it is the standard-bearer of employer-sponsored benefits, small-group insurance remains difficult to understand both for employers and employees alike. These can be difficult to offer employees that are part-time or remote. It also comes with pricey premiums, participation rate issues, and annual renewal hikes.
Self-funded health insurance
Self-funded health insurance is a type of self-insurance where the business pays for its employees’ medical expenses with its own funds rather than leveraging an insurance carrier. In this manner, the company is assuming all the health risk instead of an underwriter and therefore, this type of insurance is most often used by large employers with plenty of cashflow to handle the totality of the incoming employee claims and mitigate the potential risk.
Level-funded health insurance
In the last few years, the popularity of what’s called level-funded insurance has grown among small employers. Think of level-funded insurance as a hybrid between self-funded insurance and fully-funded insurance (i.e., traditional small group insurance). This can help employers save money (IF their employees remain healthy), but it exposes them to high risk, substantial premium increases, and fewer consumer protections.
None of these exactly check all of the boxes when you think of the best small business health insurance options.
That's because the best way to offer health care for small business is relatively new. The new reimbursement model of health insurance, where employers reimburse employees for individual health insurance tax free rather than buying it for them, comes in a couple of different flavors.
The first, the Qualified Small Employer HRA (QSEHRA), was designed specifically for small businesses like yours, with less than 50 employees. There are annual limits on contributions and employees must be enrolled in a health plan that meets minimum essential coverage requirements.
The newer version, called an individual coverage HRA (ICHRA), is available to businesses of all sizes without annual limits. Small businesses like yours can choose between the two. The key different between ICHRA and QSEHRA is that ICHRA allows for different levels of benefits to be offered to different classes of employees. QSEHRA has to be offered equally to all employees, but it does come with a little more flexibility on the types of plans that it can reimburse for (i.e., spouse's health plan, TRICARE, COBRA, and more.)
How to choose health care for small business benefits
To decide which small business benefits option is best for your team, you should ask yourself a few questions.
- How comfortable are you with risk?
- How comfortable are you with year over year premium increases?
- How will your employees feel about being put on the same plan instead of getting to choose their own (that works with their own doctors, prescriptions, etc)?
- Do you have employees in different states or part-time employees that you want to offer benefits to?
- What does the individual health insurance market look like in your area?
You probably see where this is going. Traditional small group health insurance, as well as self-funded and level-funded options, come with risk exposure, unpredictability and very little flexibility for your diverse workforce.
ICHRA and QSEHRA, on the other hand, protect you from risk, are predictable in year over year cost, can be tailored to match your benefits budget, and can work well with remote and part-timers. As well, your employees will enjoy choosing their own plan (especially with the help of Take Command's talented enrollment team!)
In many locations, individual health insurance rates are actually lower than small group health plan premiums, meaning that your benefits dollars will stretch further with QSEHRA or ICHRA.
How to set up health care for small business
Setting up an HRA is super simple, and an HRA administrator like Take Command does all the heavy lifting for you.
If you're interested in learning how a QSEHRA or ICHRA might work for your business, please chat with us on our website or set up a call to speak with one of our HRA designers. We would love to help you!
I wrote this blog because I care about ideas (big and little) that can help fix our healthcare system. I used to work on projects for Kaiser Permanente and the Parkland Health & Hospital System so I've seen the system inside and out. It's so important that consumers keep up with industry shifts and changing health insurance regulations. I'm also Take Command Health's Content Editor and a busy mom. Learn more about me and connect with me on our about us page. Thanks!