SMALL GROUP INSURANCE 2020
The five most popular plans:
Option 1: Individual Coverage HRA (ICHRA)
Starting this year, two new HRA's are available to business owners: the individual coverage HRA (ICHRA) and the Excepted Benefit HRA.
The ICHRA works well for employers of all sizes, specifically because they are not restricted based on employee count like the QSEHRA (below).
The ICHRA works much like the QSEHRA, but it doesn't have contribution limits, and businesses can offer different allowance amounts based on 11 employee classes. Additionally, the ICHRA is only available to employees enrolled in individual health insurance; employees enrolled in a spouse's group health insurance policy can't participate.
Option 2: The qualified small employer HRA (QSEHRA)
An increasingly popular option, The qualified small employer health reimbursement arrangement (QSEHRA) was created through bipartisan legislation in December 2016.
With the QSEHRA, much like other health reimbursement arrangements (HRA'S), businesses with fewer than 50 employees offer employees a monthly allowance of tax-free money. Employees then enroll in an individual health insurance policy, and the business reimburses them up to their allowance amount. In addition, employees can use the QSEHRA to get reimbursements for eligible out of pocket expenses. This allows businesses to keep control over their budget while offering a meaningful benefit to their employees.
With the QSEHRA, all reimbursements are free of payroll tax for the business and its employees.
Reimbursements can be free of income tax for employees if the employee is covered by a policy providing minimum essential coverage (MEC).
The QSEHRA is often the best choice for small businesses because it offers owner and employees mutual benefits.
Option 3: Group coverage HRA'S
With a group coverage HRA, the business offers employees a monthly allowance of tax-free money in addition to the group policy. Employees then choose and pay for health care and the business reimburses them up to their allowance amount.
Generally, employees use the HRA to cover expenses like copay's, deductibles, and prescription drugs. Most items listed in IRS publication 502 are available for reimbursement, but the business can limit this list if it chooses.
Reimbursements made through the HRA are free of payroll tax to both the business and its employees. They’re also free of income tax for employees.
Businesses can structure their own employee eligibility requirements as long as employees participate in the group policy.
Option 4: Traditional group health insurance
The traditional choice of most businesses, a group health insurance policy is a plan chosen by the business that provides coverage to employees and, potentially, employees’ dependents.
Small businesses offering group health insurance pay a fixed premium for the policy, though they may pass on a portion of the premium cost to employees. Employees are responsible for copay's and deductibles associated with the services they seek.
Businesses typically purchase coverage through an insurance broker or the public Small Business Health Options (SHOP) marketplaces.
Traditional group health insurance can be a good choice for small businesses because it's relatively easy to obtain and most employees are already familiar with how it works.
Option 5: Self-funded health insurance
With a self-insurance arrangement, the business assumes the financial risk for providing health care benefits to employees. This means that rather than paying a fixed premium to an insurer, the business pays for each employee out-of-pocket claim as it arises.
Terms of eligibility and covered benefits are outlined in formal plan documents. Typically, the business sets up a trust fund to earmark money, contributed by both the business and its employees, to pay these claims. Businesses may also pair the fund with a stop-loss policy that limits the businesses’ potential risk.
Small businesses can save money with self-funded health insurance, particularly in administrative costs. Cost savings in non-claims expenses compared to group health insurance can range from 10 percent to 25 percent, according to the Self-Insurance Educational Foundation.
The five most popular plans:
- Individual Coverage HRA (health reimbursement arrangement)
- Qualified small employer HRA
- Group coverage HRA'S
- Traditional group health insurance
- Self-funded health insurance
Option 1: Individual Coverage HRA (ICHRA)
Starting this year, two new HRA's are available to business owners: the individual coverage HRA (ICHRA) and the Excepted Benefit HRA.
The ICHRA works well for employers of all sizes, specifically because they are not restricted based on employee count like the QSEHRA (below).
The ICHRA works much like the QSEHRA, but it doesn't have contribution limits, and businesses can offer different allowance amounts based on 11 employee classes. Additionally, the ICHRA is only available to employees enrolled in individual health insurance; employees enrolled in a spouse's group health insurance policy can't participate.
Option 2: The qualified small employer HRA (QSEHRA)
An increasingly popular option, The qualified small employer health reimbursement arrangement (QSEHRA) was created through bipartisan legislation in December 2016.
With the QSEHRA, much like other health reimbursement arrangements (HRA'S), businesses with fewer than 50 employees offer employees a monthly allowance of tax-free money. Employees then enroll in an individual health insurance policy, and the business reimburses them up to their allowance amount. In addition, employees can use the QSEHRA to get reimbursements for eligible out of pocket expenses. This allows businesses to keep control over their budget while offering a meaningful benefit to their employees.
With the QSEHRA, all reimbursements are free of payroll tax for the business and its employees.
Reimbursements can be free of income tax for employees if the employee is covered by a policy providing minimum essential coverage (MEC).
The QSEHRA is often the best choice for small businesses because it offers owner and employees mutual benefits.
Option 3: Group coverage HRA'S
With a group coverage HRA, the business offers employees a monthly allowance of tax-free money in addition to the group policy. Employees then choose and pay for health care and the business reimburses them up to their allowance amount.
Generally, employees use the HRA to cover expenses like copay's, deductibles, and prescription drugs. Most items listed in IRS publication 502 are available for reimbursement, but the business can limit this list if it chooses.
Reimbursements made through the HRA are free of payroll tax to both the business and its employees. They’re also free of income tax for employees.
Businesses can structure their own employee eligibility requirements as long as employees participate in the group policy.
Option 4: Traditional group health insurance
The traditional choice of most businesses, a group health insurance policy is a plan chosen by the business that provides coverage to employees and, potentially, employees’ dependents.
Small businesses offering group health insurance pay a fixed premium for the policy, though they may pass on a portion of the premium cost to employees. Employees are responsible for copay's and deductibles associated with the services they seek.
Businesses typically purchase coverage through an insurance broker or the public Small Business Health Options (SHOP) marketplaces.
Traditional group health insurance can be a good choice for small businesses because it's relatively easy to obtain and most employees are already familiar with how it works.
Option 5: Self-funded health insurance
With a self-insurance arrangement, the business assumes the financial risk for providing health care benefits to employees. This means that rather than paying a fixed premium to an insurer, the business pays for each employee out-of-pocket claim as it arises.
Terms of eligibility and covered benefits are outlined in formal plan documents. Typically, the business sets up a trust fund to earmark money, contributed by both the business and its employees, to pay these claims. Businesses may also pair the fund with a stop-loss policy that limits the businesses’ potential risk.
Small businesses can save money with self-funded health insurance, particularly in administrative costs. Cost savings in non-claims expenses compared to group health insurance can range from 10 percent to 25 percent, according to the Self-Insurance Educational Foundation.
*Since each insurance option differs in cost and benefits, it’s important to discuss your unique needs with an insurance expert who can keep you, your spouse, and your children covered under the right plan at a price you can afford.