Healthcare 101: What Small Business Owners Need to Know About Providing Insurance for Their Employees

It’s no secret that the costs of healthcare are rising and small businesses are getting hit hard.

Over the past 15 years, the cost of covering one employee under group health insurance rose nearly 200 percent, causing many companies to make the harsh choice of dropping coverage altogether.

But fortunately, there are many small business health options – many new for 2019 – that are designed to solve that problem. Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) Created through bi-partisan legislation in 2016, this option allows small employers to offer a monthly allowance of tax-free money for their employees to purchase individual health insurance. Employees can choose the plan they want; employers don’t have to be burdened by administering a traditional group plan.

The option is fairly new and still confusing to many so here’s a breakdown:

In order to use a QSEHRA, a small business or non-profit must have less than 50 full-time employees and not maintain a traditional group health plan. In order to receive tax-free reimbursements from a QSEHRA, an employee must be covered by an insurance plan (spouse’s, parents or their own individual purchased plan) that provides Minimum Essential Coverage and submit a claim for reimbursement.

Association Health Plan (ahP)

According to the U.S. Department of Labor, this concept allows groups of self-employed individuals that “band together by geography or industry to obtain healthcare coverage as if they were a single large employer.” The AHP idea has been around for decades, but in 2018, the Department of Labor expanded access following an executive order by President Trump. Starting April 1, the government will now allow new associations to form for this purpose. And existing associations now have the ability to establish themselves as AHPs if they have not already done so.

Also new? Geographic barriers are no longer a factor for people in the same industry who are interested in forming an AHP together.

Self-Funded Health Insurance

This type of plan is usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing and provider networks with a third party administrator, or they can be self-administered.

While many small businesses save money with self-funded health insurance, not having to deal with administrative costs, it is a model geared toward larger businesses with several hundred employees and is often considered “risky” for smaller companies.

Group Health Insurance

According to healthcare.gov, Group Health Insurance is defined as a health plan offered by an employer or employee organization that provides health coverage to employees and their families.

This traditional model is still the most costly option for small business – according to Mercer’s National Survey on Benefit Trends, the cost of group health insurance is estimated to cost over $13,000 per employee family in 2019. But this type of coverage is easy to obtain and favored by many employees because they are already familiar with it.

— SIBT