Small business health insurance costs for 2023 are as high as they’ve ever been. Shouldering this financial burden is a major point of stress for many small business owners today. The good news is that there are more affordable employee benefits options out there in addition to traditional small group plans. Let’s dig in!
Small business health insurance costs 2023
Health insurance benefits for employees is one the greatest determiners of employee retention. According to a recent survey, “healthcare coverage is by far the most important employee benefit when it comes to choosing or staying with an employer.” In fact, almost 40% of employees stated that healthcare is even more important than a competitive salary!
According to the Kaiser Family Foundation’s annual survey,
Annual premiums for health insurance topped $21,000 this year, up 4% from last year, with employees paying on average about $5,500 toward the cost of their coverage.
The truth is, small business health insurance costs go up every year. The unpredictability can be stressful on a budget, and it also can be hard to meet participation requirements. It’s also difficult to keep hourly, part-time or remote workers on a small group plan.
If you’re looking to get off the treadmill of pricy renewals year over year for your small group health insurance plans and are looking for a more affordable, predictable benefits model, look no further than the new HRAs taking the small business insurance market by a storm.
HRAs have been around for a few years now but are really gaining traction as more and more businesses catch on to the beauty of these tax-free health insurance options.
What is an HRA?
An HRA, or health reimbursement arrangement, allows 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.
You choose a monthly budget that works for you, your employee signs up for a health plan that works for them, then you outsource the rest to an HRA administrator (like Take Command!) so you don’t have to worry about things like compliance or forms during tax time.
We often get asked if business owners have to pre-fund their account or send money to our account so we can distribute it to their employees. The answer is no to both questions—the money stays with the employer until an employee makes a claim that qualifies for reimbursement. If employees never make claims or don’t claim the full amount, the employer keeps it all!
Two main types of HRAs
The individual coverage HRA 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. Key advantages of the ICHRA include:
- Customizable classes
- No reimbursement limits
- Works for businesses of any size
- Can reimburse both premiums and expenses
The 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. Key advantages of the QSEHRA include:
- Optimized benefits
- Tax efficiency
- Flexible design (vary by family size or age)
- Budget control (choose the budget that works best for you
- Works for small businesses with less than 50 employees
- Can reimburse for premiums and expenses
- Note the reimbursement limits
We can help!
Our team is here to make setting up an HRA for your business quick, easy, and headache-free. We’ll help you set your budget, take care of the paperwork, and help your employees pick a plan that suits their needs. From there, we do the heavy lifting! In fact, 84% of our clients report that they spend less than an hour each month administering their HRA.
This post was originally published in 2021 and has been updated to reflect all the exciting changes going on in the HRA world.