QSEHRA benefits are designed specifically for companies with less than 50 employees to help with small business employee health insurance. Health benefits for small business matter in today's competitive job market. Read on to learn more about the benefits of the Small Business HRA (aka Qualified Small Employer Health Reimbursement Arrangement).
Every smart business owner knows the key to running a successful business is to have the right people on your team. But how do you attract and retain the best and brightest while increasing the bottom line? One word...benefits! And no, we are not talking about Silicon Valley benefits of casual Friday and free lunches. Employees want and need real benefits. Not offering health benefits is a major drain on your revenue for many reasons including increased turnover and hiring costs.
Why health benefits for small business is important
Employees are attracted to benefits, particularly health benefits. 69% say they would accept one job over another if it offered better benefits.
Businesses not offering benefits are 4x more likely to have voluntary employee turnover than their counterparts offering health benefits.
In addition to losing out on talented employees, it generally costs 6-9 months of salary in recruiting and training expenses to train a new employee.
To replace an employee making $40,000 a year would cost $20,000-$30,000.
Five employees leaving in one year for the same position with benefits will cost your business $100,000- $150,000!
The problem with health stipends
Many businesses believe if they give their employees a raise, instead of group health, the employees will use the extra money to purchase their own health benefit.
This is flawed reasoning.
Employees do not consider this extra money a “benefit” and very rarely put the money towards their health. The huge problem with this method is that it increases the employee’s taxable wages.
Businesses now have to shell out more money in payroll taxes including Social Security and Medicare.
If your business with 30 employees gives each employee an extra $3,000 to purchase health insurance, you will now be spending an additional $90,000 a year on salary and an additional $6,805 in payroll taxes.
This is still less than what would be spent on a group health plan, but it hasn’t solved the problem of losing employees to companies offering health benefits.
Affordable options for small businesses
Group health plans are too expensive for most small businesses, but so is skipping health benefit altogether. One option businesses should consider is a small business HRA built entirely for them.
Small business HRA benefits
QSEHRA benefits are great for everyone, from the employer to the employee. It's a win-win.
The HRAs are tax-free and enable you to set your budget. Let’s say you still want to give your employees $3,000 to purchase health insurance. The HRA will save you the additional $6,805 in payroll taxes you would have paid if you had given that money to your employees as a wage increase. Employees submit their medical expenses up to the monthly allowance for reimbursement (also tax free). The HRA is considered a formal benefit, so employee retention will increase once the HRA is in place, saving the hiring and training costs associated with replacing lost employees.
→ Read this QSEHRA review of Take Command from an IT consultant!
More benefits include:
- Flexibility: employers are locked in to
- Personalization: employees choose the best health plan for them based on their family's unique needs.
- Cost savings: employers can set a budget and stick with it. No pricey renewals.
- Portability: Employees can take their health plans with them if they move on to another job.
Still have questions about QSEHRA benefits?
Take Command makes setting up a QSEHRA for your business easy (read about our QSEHRA administration here). Our team will help you set your budget, take care of the admin paperwork, and help your employees pick a plan that suits their needs.
No need to worry about finding the perfect plan that has the right doctor network or prescription coverage, ultimately leaving someone left out and disgruntled.
With the HRA, each employee picks the perfect plan for them that fits within your budget.
→ Read up on how ARPA affects COBRA and QSEHRA.
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!