How do you provide affordable health insurance if you only have one or two employees? Chiropractors are faced with this dilemma every year when it comes time for open enrollment. Employer group plans aren't affordable with few employees. A new option for health insurance for chiropractors is to reimburse themselves and their employees for health insurance premiums and medical expenses through a Qualified Small Employer Health Reimbursement Account (QSEHRA). Yes, we know it’s a mouthful! Since the passage of the 21st Century Cures Act, chiropractic offices have been eager to open QSEHRAs as a method of reducing taxes and expanding benefits. Did you know you can open a small business HRA anytime during the year? There is no open enrollment or waiting periods to get started!
Affordable health insurance for chiropractors
The most important thing about the small business HRA is that it allows small businesses such as chiropractic offices to reimburse employees tax-free for individual health insurance premiums and medical expenses. This is a big deal because chiropractic offices can now get the same favorable tax treatment as big company group health plans but with a lot less hassle.
It also enables chiropractors 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. Chiropractors can now give themselves and their employees a fixed dollar amount each month, say $250, and each employee can then shop for the plan that fits his or her needs the best. Sally can choose a Blue Cross plan for her doctor, Roger can get Aetna to cover his prescription, and Betty 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 allows chiropractic offices complete control over the costs of the health benefits, creating predictability within the health benefits budget. For example, with defined contribution health benefits:
- There are no minimum amounts to contribute (the chiropractor 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 chiropractic office
Do you qualify for a QSEHRA?
In order to participate in the Qualified Small Employer HRA, the following criteria need to be met.
- The chiropractic 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 $5300 for a single employee and $10,700 (for 2021) 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 participating 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 chiropractic 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 QSEHRA, 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 dental, vision, 24/7 doctor help line, medical bill negotiation and pharmacy discounts.
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!