Employers remain the main source of health insurance for Americans. They provide coverage to more than 156 million people. However, that may be changing.
With increased remote work and hybrid arrangements, more businesses are reconsidering what may feel like an outdated arrangement of employer-based health insurance. At the same time, plans can be very expensive, especially for individuals or their children who have chronic health conditions. Good businesses want to take care of and attract quality employees.
Fortunately, there are health insurance alternatives that businesses can offer. These can help avoid expensive premiums while providing a safety net for your workers. Keep reading to find out which may be the best fit for your company or organization.
Challenges With Small Group Health Insurance Plans
Even for small businesses, the most common way to get coverage for their employees is by negotiating group plans. In most cases, employers and employees split the premium costs. Businesses have to decide if coverage extends to employee family members, which can impact premium prices.
One of the main challenges is that these tend to be very expensive for small businesses. They are based on buying power, so, to be effective, you need a high participation rate. If a lot of employees choose not to take part, it can become even less cost-effective.
Small Business Health Insurance Alternatives
Small businesses are not required to offer health coverage. (Applicable Large Employers, or ALE’s, defined as employers with 50 or more full-time or full-time equivalent employees, however, are required to provide minimum essential coverage). Beyond employee well-being, the dilemma is that, without some kind of health benefit, it can be difficult to attract and keep talented staff.
Small businesses who do not wish to offer group coverage, for whatever reason, have options. Here are a few to consider.
Health Stipends
Health stipends are fixed, taxable allotments to employees to help buy health insurance or pay out-of-pocket expenses. This can be a big plus, depending on the individual’s level of coverage and health needs (including medications).
The downsides here are that there are no tax advantages for the business and no collective buying power. Yet it might be one of the best alternatives to health insurance group plans with exorbitant premiums. In addition, although the employer can provide additional compensation with the intention of the employee to purchase health coverage, the employer cannot legally require the employee to show proof.
Health Reimbursement Accounts (HRA)
HRAs are employer-funded plans that reimburse employees for qualifying medical expenses. They have a cap for any given calendar year. The reimbursement is not taxed, and the remaining balances can be rolled over to the next year.
Besides being non-taxable income, HRA’s are beneficial for small employers because they are relatively easy and inexpensive to manage. HRA’s also allow employers to ensure that funds allocated to HRA are spent on health-related costs.
Health Savings Accounts (HSA)
HSAs are also tax-advantaged but funded by employees. They are most common with individuals who have high-deductible health plans.
These allow participants to set aside funds from their paychecks that they can then use for approved medical expenses throughout the year. HSAs do not provide health coverage but can be a good alternative.
Discounted Medical Health Programs
These programs allow participants to receive medical care through a very limited set of providers or facilities. This requires a monthly or annual fee to receive a discount card.
Employers can offer these in addition to or in place of group insurance plans. They can be a great safety net alternative.
Besides a limited network, one limitation is that providers can over time. This makes it difficult to assess the value of such plans.
Association Health Plans (AHP)
One of the best group health insurance alternatives is AHPs. These allow small businesses to band together and buy health insurance plans as a group.
This gives them more buying power and makes the plans available to employees more attractive. They are common for religious organizations but almost any group of businesses can participate in these types of plans.
Learn More About Small Business Health Options
Now that you know some health insurance alternatives for businesses, you can decide which is best for you. It is important to weigh all the options, so you can make the right decision for your business and your employees.
At Valor Payroll Solutions, our goal is to help local businesses in the Tulsa and Northwest Arkansas areas. Our team of experts offers consulting, payroll, timekeeping, human resources, electronic onboarding, and many other services. Reach out to us today to learn more.
