With only a few employees, dental offices have traditionally been unable to offer employees group health plans because of sky-high costs. The recent passage of the 21st Century Cures Act allows small businesses such as dental offices to offer employee benefits through a Qualified Small Employer Health Reimbursement Arrangement. It allows dental offices to reimburse employees for health insurance premiums and medical expenses. Since the passage of the 21st Century Cures Act last December, dental offices have been eager to open small business HRAs as a method of retaining and recruiting wonderful employees.
Affordable health insurance for dental offices
The most important thing about a small business HRA is that it allows small businesses such as dental offices to reimburse employees tax-free for individual health insurance premiums and medical expenses. This is a big deal because dental offices can now get the same favorable tax treatment as big company group health plans but with a lot less hassle.
It also enables dental offices to adopt a strategy called "defined contribution" which is much simpler than hassling with a one-size-fits all group plan and is proven to be much more efficient, affordable, and predictable. Dental offices can now give their employees a fixed dollar amount each month, say $200, and each employee can then shop for the plan that fits his or her needs the best. Pam can choose a Blue Cross plan for her doctor, Dwight can get Aetna to cover his prescription, and Angela can stay on her husband's group plan. Gone are the days of comparing quotes from each insurance company or the headache of trying to get everyone what they want without breaking the budget! And employees end up happier too.
Defined contribution health benefits allow dental offices complete control over the costs of the health benefits, creating predictability with the health benefits budget. For example, with defined contribution health benefits:
- There are no minimum amounts to contribute (the dental office decides the amounts of the defined contribution allowances).
- Costs are not incurred until employees receive reimbursement
- Pre-funding accounts are not required
- Unused funds stay with the dental office
Do you qualify for a small business HRA?
In order to participate, the following criteria need to be met.
- The dental office must have fewer than 50 full time employees
- Cannot be combined with a group health plan
- Employees use the HRA to reimburse health insurance premiums and other out-of-pocket medical expenses tax-free.
- There are no minimum contributions to participate. Annual contributions are capped at $4,950 for a single employee and $10,000 for an employee with a family. HRAs are 100 percent company funded and employee contributions are not allowed.
- Employees participating are required to have minimum essential coverage to receive HRA reimbursements.
- Employees may access premium tax credits. However, if an employee is eligible for a premium tax credit, the amount of the credit will be reduced by the monthly HRA amount.
- Generally, the dental office must make the same HRA contributions for all eligible employees. However, amounts may be varied based on family status or employment status such as full-time or part-time staff.
Take Command is here to help
Does all of this sound complicated? Expensive? Here's some good news. With our help, this can be easy! Our new QSEHRA platform will handle all the accounting and legal legwork for the small business HRA, take care of onboarding each of your employees, and make tax time easy and painless. You'll never have to hassle with receipts or worry about setting up a health plan again.
Another perk is that you can offer a personalized employee benefits portal and provide "big company" perks like vision, 24/7 doctor help line, medical bill negotiation and pharmacy discounts. Sweet!
I wrote this blog because I love helping people decode confusing insurance jargon and understand the fine print. I'm a licensed health insurance professional and specialize in simplifying health insurance for individuals and small businesses. My QSEHRA articles have been featured regularly on Accounting Today, Accounting Web, HRWeb, and other industry publications. I'm also a member of Take Command Health's client success team and a full-time mom. Learn more about me and connect with me on our about us page. Thanks!