If you’re a business owner, your brain is probably working constantly to manage all things well. Health insurance for employees is likely to be on your list of things to research, but perhaps you’re feeling overwhelmed by all the information, choices, and options.
Not to add to your stress, but according to a recent survey, “healthcare coverage is by far the most important employee benefit when it comes to choosing or staying with an employer.” In fact, almost 40% of employees stated that healthcare is even more important than a competitive salary! So in order to keep your growing team happy (and retain them!), it’s important to offer health care.
Deep breath. Let’s start at the very beginning. (A very good place to start.)
Am I required to offer health insurance to employees?
Under the Employer Mandate, the Affordable Care Act requires that all employers with more than 50 employees must offer health insurance that's affordable. There are great options available, even if you have less than 50 employees, but we’ll get there.
What are the options for health insurance for employees?
We've put together a comprehensive guide explaining your small business health insurance options here, but below are the main ideas that you'll want to get familiar with.
- Small group insurance - for the most part, small-group insurance has been the primary option for many small employers offering health benefits for their employees. For the employer, it’s relatively simple: pick a plan. These plans are well known, tax-free, with solid product options, and are proven to be an effective retention strategy. However, they can also be expensive, with unpredictable premium increases, and participation rate requirements.
- Self-funded plans- employers pay for claims out of pocket when they arise as opposed to paying a predetermined premium to a carrier for a small group plan. This type of plan, also known as a self-insured plan, is usually seen with a large enterprise as a means to control their healthcare spending. While these plans are more customizable to your workforce, and more affordable per enrolled employee than a traditional plan, the potential risk is much higher since the company is responsible for paying out the actual claims.
- HRAs- employers reimburse their employees for individual insurance premiums and medical expenses (if applicable) on a pre-tax basis. 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 use of new reimbursement models like QSEHRA and ICHRA put the employer's reimbursements on nearly the same tax playing field as traditional small group plans, but without all the hassles and requirements.
- QSEHRA: a qualified small employee HRA allows small employers (businesses with less than 50 FTEs) to set aside a fixed amount of money each month (up to X for individuals and x for families in 2020) that employees can use to purchase individual health insurance or use on medical expenses, tax-free.
- ICHRA: the 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. An ICHRA can also be integrated with a group plan, which is another distinction.
According to the Kaiser Family Foundation survey, many companies don’t offer health benefits to part-time or temporary workers. With ICHRA’s added benefit of employee classes, you can!