Nonprofit Health Insurance Options
Health insurance costs money. So how do not-for-profit organizations afford to offer it to their employees?
There are some very good reasons employers of any kind are likely to get a boost for their business by offering employees health care coverage benefits.
- Health insurance is at the top of the benefits wish list for employees, even more important than getting a raise.
- Health insurance benefits lead as the main reason employees are satisfied in their jobs.
- Satisfied employees are more productive.
- Retention grows when employees are satisfied with their jobs.
- Some employees say they would be willing to have their pay cut if it meant they’d receive a quality benefits package.
The Cost of Offering Health Insurance Benefits
Roughly half of U.S. companies provide health insurance for employees. Of the two-thirds of all nonprofits with fewer than 50 employees, 47% offer employees health insurance benefits.
Employers, on average, pay 83 percent of single employees’ premiums ($5,179 each annually) and 72 percent of family coverage ($12,591 each family policy, annually).
Still, the median price of replacing an employee is 20 percent of the employee’s salary, according to a survey by Center for American Progress. Finding a replacement, training the new employee and initial slowed productivity are also costly.
Coverage Options for Nonprofit Organizations
If you would like to increase your employees’ job satisfaction and productivity by offering health care coverage, here are some nonprofit health insurance options.
Affordable Care Act (ACA) includes the Small Business Health Options Program (SHOP). It provides access to competitive health insurance marketplaces at the state and federal levels. Both small organizations and individuals can shop for policies, if you have 50 or fewer employees. If you have 25 or fewer employees, you may be able to claim a Small Business Health Care Tax Credit.
Group Health Insurance
You can purchase or offer employees a group health insurance plan for individuals or families. Costs for these kinds of plans have been found to go up every year.
Health Reimbursement Arrangement (HRA)
Can’t afford group coverage for your employees? Consider an HRA, or health reimbursement arrangement. The employer contributes to the interest-bearing account and the funds come to the employee tax-free. The employee cannot make contributions.
Saving Money with an HRA
Health reimbursement arrangements (HRA) saves money and earns interest while helping employees cover medical costs they might incur while paying for their own policies, such as premiums and out-of-pocket expenses. The money that comes to employees each month is tax-free.
HRAs are good for both employer and employee.
- Employees decide how they will spend their tax-free “allowance” to pay for the health insurance policy that fits them best.
- Employers can set a cap to the allowances to control costs.
- Note that reimbursable expenses vary according to the plan.
Most Common HRAs
- Qualified Small Employer HRA – This HRA is meant for organizations where the number of employees is 50 or less. Employees can participate without having separate health insurance coverage. However, if they don’t have health insurance, they will receive reimbursements that are taxable.
- Individual Coverage HRA – Employers of all sizes can offer this benefit, tax free for employees. Whether it’s a nonprofit or business, the organization can reimburse employees for their medical expenses. Participating employees are required to have individual life insurance coverage.
- Group Coverage HRA – Also called an integrated HRA, this kind of HRA is attached to a company’s group health insurance plan, typically one that includes a high-deductible. Instead of monthly, allowances are given once a year. Group coverage HRAs can be a more expensive option.
- Retirement HRA – As with standard HRAs, retirement HRAs are owned by the employer and reimbursements are tax-free for retired employees. You become eligible for a retirement HRA account when you reach retirement age (66 or 67 depending on the individual’s birth year). If you retire early, as early as age 62, you can continue to receive retirement HRA funding. Reimbursements can be used to pay for medical expenses beyond what Medicare pays.
Generally, qualified retiree medical expenses include:
- COBRA premiums
- Premiums for any additional health insurance
- Premiums for Medicare Parts A, B and D, a Medicare Advantage Plan or Supplemental Plan.
HRAs and Nonprofits Overview
An HRA is a good insurance solution for nonprofit organizations because:
- Employees receive tax-free reimbursements for out-of-pocket health care expenses.
- Nonprofit employers determine how much they can spend and set the total amount available to employees.
- Employers also have ability to adjust the allowance based on budget constraints throughout the year.
- Employees can use the allowance to buy the health insurance and services best for them as individuals.
Do HRA Funds Roll Over?
The employer makes decisions regarding the account and the type of HRA being used both influence the answer to this question. Monthly rollovers, usually dispersed automatically, is the more common but the employer can make it an annual event. But there are variances. For instance, a qualified small employer HRA, which has a maximum allowance cap, includes a rule that the total amount reimbursed during the year cannot exceed federal maximum caps.
What Happens When the Employee Dies?
If a participating employee dies in retirement or at work funds will be accessible to a surviving spouse or qualifying dependent. If the employee has no beneficiaries, an estate executor or trustee can submit medical expense claims to the HRA for the deceased’s expenses that were incurred prior to the death. Any funds remaining in the HRA go back to the employer.
To learn more about health insurance coverage on the EINSURANCE website. You can also receive coverage plan quotes from several providers.