Small business owners are finding out more and more that offering group plans for their employees is getting outlandishly expensive. If this is you, read on to see why QSEHRA might be the answer you’ve been looking for. Let’s break down the pros and cons of switching from a group plan to QSEHRA.
Affordability: QSEHRA vs. Group Plans
|Pros||There is no minimum contribution to give each month to your employees. You as the employer get to choose how much you are contributing each month, and when your contribution is deposited to your employees. Your employees also have the freedom to choose the insurance that is right for them. They don’t have to sign up for a plan that only slightly benefits them.||Employees have access to discounted group plan rates when they go the group plan route. Employees buying their own individual plans don’t have the benefit of discounted rates.|
|Cons||One way an employer might want to cut down on costs is to exclude different classes of employees. For example, employees who are older or have large family numbers would cost an employer more in contributions. This would not be fair to employees according to the rules of QSEHRA.||Group plan pricing increases year over year on average. Each state is different but there are increases over the last 10 years with most states seeing double.|
Flexibility: QSEHRA vs. Group Plans
|Pros||There are many options when it comes to strutting your QSEHRA plan. Employers are able to include AND exclude different classes of employees. For example, part time employees, seasonal, and employees under 25 can be excluded from contributions each month. Not to mention, employees are able to find a plan that is exactly what they need. Who wouldn’t want to be able to choose their own plan knowing what their health needs are!||Employers have the ability to advertise benefit packages that can attract a range of potential employees.|
|Cons||There are different tax rules when it comes to QSEHRA. Depending on how you file your taxes, the government has maximum limits in place.||Small businesses don’t usually have the flexibility to offer multiple plans so employees don’t have multiple options to find the right plan for them.|
Participation: QSEHRA vs. Group Plans
|Pros||The minimum number of employees needed to participate is 1!||N/A|
|Cons||QSEHRAs are only available for small businesses. This means that businesses with more than 50 employees are not eligible for QSEHRA.||Most states have a high participation rate of around 70% which makes it difficult for small business owners to compete with.
Coverage Options: QSEHRA vs. Group Plans
|Pros||A huge benefit about QSEHRA is the personalization for each employee. Employees have the freedom to choose the plan that is right for them based on health needs, family size, and marital status.||N/A|
|Cons||Short term plans and Sharing plans are not reimbursable under QSEHRA rules. Some states have limited selections for individual and family plans. This might make it difficult for employees to find a truly personalized coverage option.||Most group plans have a one size fits all approach. Employees aren’t able to reap the full benefit of an “individualized to them” plan.|
Tax Benefits: QSEHRA vs. Group Plans
|Pros||A huge benefit of QSEHRA is that the reimbursements are tax free and employees can save around 30% compared to a large group plan insurance option. Additionally, reimbursements from employers cover monthly health insurance premiums and qualifying medical expenses.||Tax free contributions are allowed from both the employer and the employee. Allowing the most bang for you buck pre tax.|
|Cons||Unfortunately, any cost after the employer reimbursement is on the employee to pay for with post tax money.||Only health insurance premiums are covered while medical expenses are not covered.|
Location: QSEHRA vs. Group Plans
|Pros||Small business owners with employees in multiple states are still eligible for QSEHRA.||N/A|
|Cons||N/A||There are limited options when it comes to plans that cover employees across multiple states. For small businesses with employees in different states, this wouldn’t be an option.|
PTC (Personal Tax Credit): QSEHRA vs. Group Plans
|Cons||Personal tax credits offset the QSEHRA reimbursement money dollar for dollar. They cannot be stacked and used simultaneously.||Employees that would qualify for PTC are not able to access them if they are participating in a group plan.|
What's best for your business?
As you can see, QSEHRA is a great option for small businesses that want a flexible, affordable option for health benefits for their staff. The customizable design of Take Command's QSEHRA administration tool helps small businesses create a small business HRA that works best for their budget and business.
Still wondering what the best option is for your business? Learn more about our small business platform or schedule a call with one of our small business HRA experts today.
You can even play with the numbers with our QSEHRA tax savings calculator to see what it would look like for 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!