Amy Penna, in her article “Small business health insurance: The state of the market and what small businesses are doing about it”, states:
“You don’t have to look hard to find evidence that group health insurance has become prohibitively expensive for small businesses with fewer than 50 full-time employees. As we’ve reported in the past, annual group health insurance premiums in 2017 for small businesses were $6,486 for single coverage and $17,615 for family coverage.
Additionally, traditional group health benefits come with other costs that can stretch a company’s budget. The cost to administer group health benefits adds up to over $12,000 each year. With figures like these, it’s no wonder that the number of small businesses offering group health insurance has declined by 25 percent since 2010. Currently, less than half of small businesses offer any kind of health insurance to their workers.”
Many small businesses would like to offer health insurance benefits but finding traditional group insurance is too expensive. There are alternatives solutions such as a taxable wage increase or tax-free personalized benefits (QSEHRA) and other options that benefit both the employer and the employee in these ways:
- The health insurance plan belongs to the employee and, in the event, the employee leaves employment, they are not without health insurance nor are they subject to the high cost of COBRA.
- The employee has more options to customize their health insurance to fit their needs and budget.
- The employer is not involved with the annual task of reviewing health insurance plan benefits. As one employer recently stated, “I can be out of the business of health insurance and not feel pressured on making the right plan options for my employees. I have also been the person they come to when they are not happy with their insurance. It is a great relief not to have to deal with those issues.”
The Taxable Wage Increase method increases employee’s wages so they can afford to purchase a health plan. On the company side, business owners don’t have to worry about playing middleman between the insurance company and their employees. On the other hand, the employee pays income tax on the increased wages. However, the premium can be lower than that of a group plan premium so the employee still comes out financially ahead and they have a health insurance plan customized to their needs.
The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) also known as a small business HRA, is a company-funded, tax-free health benefit used to reimburse employees for personal health care expenses. The business must establish legal QSEHRA plan documents, including a summary plan description to comply with IRS and Department of Labor requirements.