By: Adam Callaway, PATH
The tax-advantage trend that’s about to shake up open enrollment for small businesses:
With open enrollment in full swing, health insurance is on the brain for a lot of people. And rightfully so. The dollars spent funding health plans represent one of the biggest investments you make, especially if you are a small business owner offering benefits to attract the best talent in your industry. And with the open enrollment deadline already here, you’re probably keeping your eyes on the prices, the headlines, and the changes shaping health policy—as you should.
According to research from The Kaiser Family Foundation, only half of small businesses (companies with 3-49 employees) offered coverage last year. That’s down from around 2/3 a decade ago.
It’s no surprise why. For starters, traditional health plans are crazy expensive, and the premium pricing just keeps creeping up year after year. For small businesses on a budget (and most are, right?) expensive and unpredictable aren’t exactly going to fit the bill.
So, do you shift the burden of funding health insurance on your employees and risk losing talent? Or do you blow your budget on a group health plan that won’t fit everyone’s needs?
There’s some good news for small business owners and entrepreneurs out there: there’s a relatively new tax-advantaged HRA designed just for businesses like yours. It’s called a QSEHRA (qualified small employer health reimbursement arrangement) and it’s designed as any successful small business should be: it’s smart, it’s efficient, it’s affordable, it’s flexible.
How does it work?
You choose the amount to reimburse each month and your employees choose the health plan that best fits their needs. The bottom line is that QSEHRAs help small businesses enjoy the same tax breaks and buying power that large corporations receive year after year. And the best part? It helps businesses like yours afford to play the benefits game and compete for talent with those large companies and their cushy benefits.
So, what’s the catch?
One thing that’s working against QSEHRAs in general is a lack of awareness. While it’s been around for two years, there’s a lot of gray area around how it’s implemented. QSEHRAs are so great for startups and small businesses instead of pricey group plans or health stipends that lack the tax advantages.
- It’s smart. A QSEHRA uses tax benefits to help small businesses. Contributions to QSEHRA are tax-free. That means you aren’t paying payroll tax and your employees aren’t paying income tax. That’s a win-win.
- Boosts retention. Wondering what the number one factor is for millennials and job seekers considering a new job? Health benefits. Without a competitive benefits package, the best and brightest might choose to go elsewhere. Another perk for employees is that they can choose the best plan for them instead of being looped into a group plan that might not cover their doctors, their prescriptions, or their health needs.
- Saves time. Selecting and administering a group plan takes a lot of time and effort—we estimate 15 to 20 hours a month. As a small business owner, you’ve got better things to do (like growing your company). Choosing the right QSEHRA administration platform will save you time down the road as well. Take Command Health’s QSEHRA platform syncs with payroll software for seamless reimbursement, onboards employees, generates plan documents, ensures that you remain compliant, and makes tax time a breeze.
- Saves your budget. These costs are predictable. Unlike a group plan that might creep up in costs year over year, you control the amount contributed to a QSEHRA. It’s on your terms, within your budget, and you can make changes whenever you choose. Wondering what happens to the leftover funds if they aren’t used? It stays with the business and doesn’t roll over. That means you aren’t responsible for funding a bunch of accounts; you only pay out when an employee submits an expense for reimbursement.
- It’s flexible. You can design your QSEHRA to fit your needs and control your budget. Want to just reimburse for premiums? Great. Want to add qualified medical expenses to the deal? Even better. Want to scale the contributions based on age, status, or family size? You can do that too (as long as it’s fair!).
Want to learn more?
If you are a small business with less than 50 employees and are not currently offering a group health plan, you can get started right away. The important first step is finding the right QSEHRA administrator to do the heavy lifting for you. PATH has partnered with Take Command Health. Their small business experts are ready to help you get started and their new QSEHRA Guide is the best source of information out there.
About the author
A message from the author: We’d love to share more about QSEHRA & Take Command Health. Call Kim Callaway or email for more details.