Know Your Hra Options
QSEHRA: a Qualified Small Employer HRA allows small employers to set aside a fixed amount of money each month that employees can use to purchase individual health insurance or use on medical expenses, tax-free. This means employers get to offer benefits in a tax-efficient manner without the hassle or headache of administering a traditional group plan and employees can choose the plan they want. The key thing to remember here is that all employees must be reimbursed at the same level. The QSEHRA is designed for employers with less than 50 employees to reimburse for premiums and medical expenses if the plan allows.
ICHRA: an Individual Coverage HRA allows employers of any size to reimburse any amount per month for healthcare expenses incurred by employees on a tax-free basis, starting at any time of the year. The distinguishing element of this HRA is that employees can be divided into an unlimited number of classes, like hourly vs. salary or even based on location, and be reimbursed at different levels. The ICHRA is for companies of any size. There are no limits to how much an employer can offer for reimbursement.
What Basic Benefits Must A Company Provide Employees
Vacation, health insurance, long-term disability coverage, tuition reimbursement, and retirement savings plans are just a few of the many benefits employers may offer employees. But what benefits, required by state, federal, or local statute, must a company provide its workers? This information is particularly important for small businesses, which have to allocate benefit dollars carefully while complying with relevant laws.
Medical Loss Ratio Rebates
Insurance companies must generally spend at least 80% of premium dollars on medical care. Insurance companies that don’t meet this requirement must provide rebates to policyholders usually an employer who provides a group health plan. Employers who get these premium rebates must allocate the rebate properly. Learn more about federal tax treatment of Medical Loss Ratio rebates from the IRS.
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Healthcare You Can Afford
Group Insurance Explained
Generally, there are three types of health plans your employer may offer: HMO , EPO , POS , and PPO .Depending on the level of cost-sharing, most employers pay anywhere between 50-70% of your health plan.
Many group insurance plans can cover immediate family members, or dependents, such as a spouse and children. Additionally, the premium rates for all employees are determined by the insurer, and part of the employeesâ premiums are paid for by the employer.
The Cost of Group Insurance
The average costs of a health plan are $500 per individual and $1,000 per family. This means you can expect to pay $150 – $300 a month out of your salary. In some cases, your employers can opt to pay for 100% of your health plan, but if there is a deductible , you still have to pay a certain amount out-of-pocket.
While it may be convenient to accept the health insurance plan your employer is offering, it’s important to evaluate if it’s actually worth accepting based on your healthcare needs.
Dr. Tulenko explains how to determine if the plan is right for you:
You should start by comparing the health insurance plan that your employer is offering with ones that you can purchase in your state health insurance market or the national health insurance market. Some factors to consider include:
If Your Workforce Is Growing Fast
If your small business is doing well and expanding its workforce quickly, then its a definite sign that soon you will need to offer your employees health insurance coverage. According to the Affordable Care Act,1 you will be required to provide coverage to your workers when your company grows to 50 or more employees or else you are likely to face a penalty. This employer mandate came into effect in 2016 and requires that employers with this number of employees need to offer health insurance to at least 95 percent of their full-time workforce .
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Who Is Helped By The New Qsehra Reimbursement Rules
For employees who work for small businesses that don’t offer health insurance, the availability of premium subsidies in the exchanges depends on income, along with family size and the cost of coverage in the applicant’s area. In general, subsidies are available in most cases if the applicant’s household income doesn’t exceed 400% of the poverty level.
If you’re currently receiving a premium subsidy in the exchange and your employer begins reimbursing premiums under a QSEHRA, the exchange subsidy would be reduced by the amount of the employer reimbursement.
But if you’re not eligible for a premium subsidy in the exchange , a QSEHRA could directly benefit you if your employer decides to take advantage of that option.
This article outlines various situations in which a QSEHRA benefit can be helpful, harmful, or neutral to an employee’s financial situation.
Reporting Information On Health Coverage By Employers And Insurance Companies
The health care law requires the following organizations and some other parties to report that they provide health coverage to their employees:
- Certain employers, generally those with 50 or more full-time and full-time equivalent employees
- Health insurance companies
When You Want To Boost Your Employee Wellness And Productivity
Healthy and comfortable employees are more productive than those with wellness-issues. Therefore, its essential to keep your employees as happy and healthy as possible by providing coverage so that they can get care whenever its necessary. So, if your employees are not performing well on the job because of healthcare-related issues, its time you consider giving them health insurance coverage.
When You Are Looking For Tax Breaks
If you are searching for ways that your company can enjoy more tax breaks, providing health insurance to your employees could work to your advantage. It can help you kill two birds with one stone provide healthcare affordability to your workers and enjoy tax breaks from the IRS. However, this varies from company to company, and therefore you should consult your accountant or tax consultant for professional advice.
You may be concerned that offering health insurance coverage will be expensive for your company, but youll be surprised to know it isnt. If you do comprehensive research or use a broker to find a reliable cover for you, your company can reap massive benefits!
Coverage Unaffordable Or Too Skimpy
- An employer-sponsored plan is considered unaffordable if the employee contribution for premiums is more than 9.83 percent of household income in 2021 for employee-only coverage .
- To provide minimum value, an employers plan has to cover at least 60 percent of average expected medical costs, and provide substantial coverage for inpatient care and physician services.
If an employers plan is unaffordable and/or doesnt provide minimum value, the employer would face the lesser of two penalty options: $4,060 per employee receiving premium subsidies in the exchange , OR the $2,700 per full-time employee penalty described above.
Consider a business that has 120 full-time employees and offers coverage, but its either not affordable and/or doesnt provide minimum value: If 70 employees get subsidies in the exchange in 2021, the employer would pay a penalty of $243,000 for the year x 2,700 = 243,000, since thats smaller than the alternative penalty calculation .
But if only 20 of the employees get subsidized coverage in the exchange, the employer would pay $81,200 for the year , since thats smaller than the alternate calculation of x 2,700, which would be $243,000.
Are Employers Required To Offer Small Business Health Insurance In 2021
While the Affordable Care Act requires employers of 50 or more employees and full-time equivalent employees to offer affordable group health insurance that includes essential benefits or pay a penalty, the ACA never required small business owners to provide group health insurance to their employees. According to the ACA requirements for employers, business owners with fewer than 50 full-time and full-time equivalent employees are considered small businesses. So, if your company falls within the small business classification, you have the option to offer group health insurance or not.
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Plan Setup And Administration
Administering a health plan can be time-consuming and complex, especially for the first year or two. Compliance with the Affordable Care Act, budgeting, and finding a program administrator are just a few of the many tasks associated with implementation. Integrating your benefits and HR function into one user-friendly platform is often a cost-effective and efficient solution, even for smaller companies. A third-party administrator that specializes in health care plans can also help your company remain in compliance with the many rules and regulations surrounding the Affordable Care Act and other health insurance requirements. Administrative tasks to be outsourced may include:
- Tracking benefits eligibility
Once I Am Receiving Benefits Can My Employer Terminate Them
Yes. An employer may at any time amend the terms of an existing plan, including termination of the plan. Additionally, an employer may reduce or terminate health benefits of retired former employees who become eligible for Medicare Benefits without violating the Age Discrimination in Employment Act.
Exception: An employer may not terminate, suspend, discipline, discriminate, or take any adverse action against the employee for exercising his or her rights under a plan or ERISA, or for giving information or testimony in an investigation or proceeding relating to ERISA.
Fine They Can Go Up To The Silver Gold Or Even Platinum Level Coverage
The employer’s contribution remains based on the Bronze and the employee pays the difference with pre-tax money.
Of course, they’re only going to do this if it makes sense financially tothem.
This is the best of both worlds.
Employer caps exposure for health care costs while the employee can pickaccording to his/her health care needs and budget.
If an employer has to offer health insurance, this is the way to do it!
We can offer this mini-cafeteria plan for small and large companies.
Can I Use A Health Savings Account To Pay For A Marketplace Plan
When you shop on the Marketplace for a plan, you may be able to pay your premiums with pre-tax dollars through a Health Savings Account . A Health Savings Account is a special type of savings account. It lets you set aside pre-tax dollars for certain kinds of qualified health expenses. Using an HSA can help you lower your healthcare costs overall through the use of pre-tax dollars. However, when it comes to the Marketplace, only certain plans let you use your HSA to pay for premiums. That means you would need to decide that enrolling through the Marketplace is the best option for you and then look specifically for an HSA plan.
And unless you get a High-Deductible Health Plan , you wont be able to use pre-tax dollars for your premiums. On average, plans with deductibles of at least $1,350 for an individual qualify as being HDHP. Likewise, plans with deductibles of $2,700 for a family generally qualify as being a HDHP. When you shop on the Marketplace, you can see which plans are HSA-eligible. Should you be able to use your HSA for your premiums, keep in mind that in 2018, the maximum amount you could contribute from an HSA for a HDHP was $3,450 for an individual and $6,900 for a family.
Budgeting For Employee Health Care
Companies planning to offer group health care insurance should determine how much of their budget can be allocated to group health insurance. You can manage overall health care spending by determining a specific plan premium you’ll pay for each employee, or by allocating a specific dollar amount and letting employees choose their own plan.
As mentioned above, if you qualify for a small-business health care tax credit, this could make a difference in your budget. Consider using an online calculator to help estimate the overall costs of offering a health care plan.
Health plan implementation requires compliance with the Affordable Care Act, budgeting, and finding a program administrator, among many other tasks.
Is My Employer Required To Provide Medical Benefits To My Spouse Domestic Partner Or Dependent Children
Much like employers are not required by law to provide health and welfare benefits to employees, they are equally not required to provide those benefits to spouses, domestic partners or dependent children. If, however, an employer voluntarily provides spousal benefits through an insurance provider or health maintenance organizations , the employer must also provide those same benefits to registered domestic partners of the covered employees. Thats because AB 2208 requires equal treatment of spouses and registered domestic partners in all aspects of insurance coverage.
Note: AB 2208 applies to insurance providers and HMOs who supply insurance to an employers employees, but does not apply to employers who self-insure, who are not required to provide equal domestic partner coverage to their employees.
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Adding Families May Lower Rates For Everyone
Depending on the makeup of your workforce, adding employees’ families may diversify your coverage group in a way that lowers rates for everyone. For instance, if you own a hair salon and you employ primarily women in their 20s, your healthcare premiums may be higher due to the potential of pregnancy-related costs.
Including their spouses and children adds diversity to the group, helping to spread out the healthcare cost risks. When you have employees with similar risks in the same pool, diversification is going to give you a better financial advantage,” Dutta says. For that reason, its a smart move to obtain quotes both ways before making a decision.
Finally, consider that employees consider health insurance more important than any other benefit.2 Offering group health benefits is one of the best ways to show employees that you value them and their families — an important factor when it comes to retention.
About Group Health Benefits
How To Reimburse Employees For Health Insurance
To avoid the hassle of traditional group insurance plans, you may be wondering how to reimburse your employees for health insurance. Its possible through health reimbursement arrangements, or HRAs. Employers of all sizes now have more flexibility when it comes to reimbursing employees for health insurance, tax-free. This is a huge win for business owners who are looking for a more affordable, efficient way to offer small business health insurance to their teams without having to hassle with a pricey, one-size-fits-all group plan. Lets discuss your options!
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Can You Offer Health Insurance To Certain Employees Only
Written by: Josh MinerSeptember 23, 2020 at 8:05 AM
One way small employers rein in health insurance costs is to only offer the benefit to full-time employees. Many employers have asked us whether they can take this approach a step further, and offer different levels of benefits to different employees.
The short answer is yes, as long as the employer does not make these decisions on a discriminatory basis.
In this post, well explore what the law requires, how employers can legally restrict eligibility or offer different benefits to different employees, and some suggested options.
What Small Businesses Need To Know About The Employer Mandate
Under the Affordable Care Act , businesses with 50 or more full-time equivalent employees that do not offer health coverage, or that offer health coverage that does not meet certain minimum standards, may be subject to a financial penalty, referred to as the Employer Shared Responsibility payment. The Employer Shared Responsibility provisions, often referred to as the âemployer mandate,â have been in effect since 2015 for businesses with 100 or more FTE employees. But, starting in 2016, the employer mandate will become effective for businesses with 50 or more FTE employees. The purpose of this summary is to provide a brief overview of the employer mandate provisions, and to inform your business about how you may be impacted by changes to the provisions made in 2016.
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It Boosts Employee Productivity
Worrying about healthcare coverage and neglecting preventative care because of healthcare costs can lead to stress and illness, both of which lower employee productivity at work. According to the Center for Disease Control, healthier employees are more productive and are less likely to call in sick for work. Offering health care coverage to employees can reduce stress levels and encourage workers to get the care they need to maintain their health and stay productive.
Legally Required Benefits Protect Workers Health Income Well
Employee benefits fall into two categories: those required by law and those an employer chooses to offer voluntarily. The U.S. Bureau of Labor Statistics states that “egally required benefits provide workers and their families with retirement income and medical care, mitigate economic hardship resulting from loss of work and disability, and cover liabilities resulting from workplace injuries and illnesses.” Mandated basic benefits include:
Note: Some states and local jurisdictions require paid family leave and/or paid sick and safe leave. Refer to your areas regulations to see whether they apply to your business.
State requirements for these benefits may vary and may provide greater coverage and/or a greater benefit to eligible employees.
Other job perquisites are at the discretion of the employer. These can include paid vacation life and disability insurance , 401 retirement savings plans, education assistance, wellness programs, and child care assistance.
From the employee’s perspective, basic benefits can be invaluable. Although many Americans today may take Social Security, Medicare, unemployment, and worker’s compensation insurance for granted, these forms of assistance and compensation have been established for less than two generations. Prior wage earners only earned wages, nothing more. In that context, basic benefits are a big deal.
A previous version of this article was published on Aug. 26, 2014.