February 3, 2020
Business owners! You can take control of the cost of employer-provided health benefits!
The following two options can reduce your vulnerability to the rising cost of offering a traditional group health benefit plan to your employees:
1. Qualified small employer health reimbursement arrangements (QSEHRAs)
2. Individual coverage health reimbursement arrangements (ICHRAs)
The QSEHRA and ICHRA help small businesses avoid many of the problems associated with traditional group benefit plans:
Ø High cost with continued annual cost increases
Ø The internal administrative burden of managing group benefits
Ø Inconveniences and inflexibility of group plans
In today’s environment of record low unemployment, businesses need to be health benefits attractive in order to capture and retain valuable employees. Not offering health benefits is not an option. Fortunately, business owners have more health benefit options than ever before.
· Applies to businesses with less than 50 employees
· Employer decides on the budget for employee health benefit reimbursement up to the maximum annual limits allowed. For 2020 limits are: $5,250 (individual) and $10,600 (family).
· Employees choose their own health benefits based on their individual needs. Once the employee has selected an individual insurance policy and submits proof of expense, the employer reimburses the employee up to the allowance determined by the employer.
· Qualified reimbursements are not taxable wages to the employee and are a tax-deductible expense for the employer.
· The business can include all employees or limit eligibility to only full-time employees.
· New! Available beginning January 1, 2020
· Similar to a QSEHRA, an ICHRA is company funded, employee reimbursement program for qualified medical expenses
· Available to businesses of any size. No limit on the number of employees.
· No cap on the amount of annual reimbursement for health care expenses. The employer decides on the reimbursement limit.
· Employer can offer different reimbursement amounts to different classes of employees
· Employees must have coverage under an eligible individual health insurance policy in order to participate in the ICHRA.
· Employees who participate in ICHRA are no longer eligible to receive a premium tax credit.
Both the QSEHRA and ICHRA require a written plan set up and notification to employees. Plus the business will need to administrate the plan to stay in compliance. Fortunately, there are third-party administrators (TPA’s) that are affordable and allow the business to offload the setup and ongoing maintenance and compliance. If you’re going to do this, do it right, hire a TPA.
In the end, businesses have options to meet the challenges of providing health benefits during a tight labor market while at the same time being able to consider the budget and administrative constraints that fit their situation.
If you thought your only option was a Group Health Plan, think again. Today you really do have some nice alternative options to work with.
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