Do you want to offer health insurance for your company, but you aren’t sure where to start? Have you started your research, but now your head is spinning with acronyms and metal tiers and dollar signs? Do you want someone to explain, in simple terms, what the options are for health insurance for companies? Guess what! We love talking about small business health insurance options, and that’s exactly what this post will do.
Basically, when it comes to health insurance for companies, you have a few options, but small group insurance or health reimbursement arrangements are the most common.
Small Group Insurance
Historically speaking, small-group insurance has been the primary option for many small employers who are looking to offer health benefits for their employees. It is geared toward businesses with less than 50 full time employees everywhere except four states where it applies to businesses with up to 10 employees. They are ACA-compliant.
According to Kaiser Family Foundation, 56% of small businesses with 3 to 199 employees offer health benefits. 81% of those companies offer one type of plan.
There are lots of options out there; you can choose between managed care (HMO, PPO, and POS), indemnity fee-for-service, and high-deductible health plans.
Employers can buy small-group plans directly from an insurance company, via a broker or private exchange, or from their state’s SHOP Exchange.
We go into the pros and cons of this type of insurance here.
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.
Unlike Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) that are accounts, HRA stands for Health Reimbursement Arrangement, meaning that the model operates on reimbursements.
Employees will pay the insurance company or doctor’s office directly and then submit a claim to get reimbursed for their expenses tax-free.
The two main types of HRAs are:
QSEHRA (qualified small employer HRA) allows small employers (businesses with less than 50 FTEs) 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.
This post gives you more information about the QSEHRA.
ICHRA (individual coverage HRA) has all the same benefits as QSEHRA, but with no maximum contribution limits and no company size limit. In addition to the flexibility of varying rates based on age and family size like QSEHRA, the hallmark feature of ICHRA is that benefits can be scaled across different classes of employees.
This post will give you a deeper understanding of ICHRA.
What other questions do you have?
Wondering how much health insurance for employees costs? Curious about how an ICHRA compares to a traditional group plan? We’ve also written in-depth guides to both the ICHRA and QSEHRA and a comprehensive small business health insurance guide.
A wife to one and mother to four, Keely does all of the things. She’s also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and is passionate about good food, treasure hunting and upcycling. With a B.S. in Psychology from the University of Oklahoma and a knack for a witty punchline, it’s no surprise that Keely’s social posts are as clever as they get. In her (very little) free time, you’ll find Keely with her nose in a book or trying out a local restaurant with her family.