Employee Benefits

Are There Really Small Business Health Insurance Options With Value?

Beau Reid
Beau Reid
Senior Vice President, Employee Benefits

Value. Value is personal. It varies from person to person, job title to job title. We are constantly defining value. Differentiating value. Delivering value. As an industry, we have basically said that organizations with less than 50 employees are all the same and should be treated as such. And as the large insurance brokerages pull their resources out of the under 50 market segment, we are left to ponder value. Small business feels abandoned. They are left to decipher the complexity of health insurance and employee benefits, with minimal HR staffing and minimal awareness of regulatory compliance. Leaving value to be defined as “anyone who can help me.”

As people flooded out of the small business market, we couldn’t help but wade back against the current and look to see if there might be an opportunity to redefine VALUE. Through the use of technology and the evolution of employee communications, we decided there was, in fact, an opportunity to redefine the value that a small employer could expect to receive. While we continued to dig into the constraints, opportunities, and variables, President Trump created buzz by issuing an executive order about Association Health Plans. Suddenly, there was a roar of demand from small employers everywhere wanting the aggregated economies of scale that large employers enjoy. Unfortunately, the mandate also provided insurers the ability to protect themselves from bad risk and, as these aspiring Association Health Plans received rate modifiers based upon health, they lost interested parties. After several “rerates,” many of these initiatives collapsed and went away.

Small employer demand for more a solution is greater than ever, while cost and complexity reach a tipping point.

The reality is that recently passed HRA legislation QSEHRA (2017) and ICHRA (1/1/20) provide an opportunity for small business owners to define their contribution on a tax favorable basis while providing more choice to their employees.

What is QSEHRA?

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), or small business HRA, is compliant with the Affordable Care Act (ACA). It’s targeted for the under 50 full-time employee market. It enables organizations to reimburse their employees up to $4,950 per year for single coverage and up to $10,000 per year for family coverage. Employees can use the dollars to pay for premiums for health insurance purchased on the individual market and for qualified medical expenses.

In effect, the employer can identify how much money they want to contribute and can provide the assistance to the employee in a tax advantaged manner for both the business and the employee. Originally the ACA didn’t allow employers to pay for employees to acquire coverage on a local exchange. This makes it not only feasible, but perhaps even advisable.

What is ICHRA?

According to Take Command Health, ICHRA gives employers a new option when looking to provide health insurance to their employees. ICHRA stands for “Individual Coverage Health Reimbursement Arrangement” and is available for employers to start using in January 2020.

Per Take Command Health, here is some additional information that’s helpful when we talk about ICHRA and the key benefits and advantages:

  • ICHRA key benefits (vs. traditional group health plans)
    • Transfers employer responsibility for health risks
    • More personalized plan choices for employees
    • Simpler and more flexible plan design options
    • Greater budget control
    • No participation concerns
  • Key Advantages — ICHRA has several advantages over traditional group plans that may be appealing to some employers. For instance, the reimbursement model (sometimes called a “defined contribution”) gives employers greater ability to control costs and provides employees with more options to choose from. This is very different from the current model of group insurance (sometimes called a “defined benefit”) where employers must choose a one-size-fits all plan for the group and employees are limited to options sponsored by the employer. In addition, ICHRA takes the burden of managing a health plan and underlying health risks off of the employer. You or your clients won’t have to hassle with renewals, worry about participation rates, stress about what doctor networks your employees want, or be surprised by annual premium increases. Instead, with ICHRA employers can decide which employees qualify, set their monthly allowances, and get back to managing their business while employees get to choose the plans they want.

So, for the first time in many years, something truly innovative has made its way to the forefront as a value add for small business owners. By coupling these new HRAs with an enrollment and eligibility platform, small businesses can compete with larger organizations for talent, while retaining their best workers. If you’re looking for value, look no further than QSEHRA or ICHRA.

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