29 Oct Healthcare Benefits 3 Ways
Do you want to offer competitive healthcare benefits but don’t know where to start? Here are a few ways to go about it.
As a business owner, you know that employees value healthcare benefits. Offering competitive benefits to your employees will make you stand out as an employer and help increase employee satisfaction. Make sure to consult with your accountant or tax advisor prior to choosing your company’s coverage options. There’s no one size fits all way to offer healthcare benefits, but here are a few options to discuss with your accounting team.
Providing a Company Plan
If you get your own health insurance through your business on a company plan, you are required to offer that same health insurance to qualifying employees. This is a requirement of the insurance company and the state and federal government. As a business, you cannot pick and choose who you offer health insurance to through your company’s plan.
For company plans, there are two constant qualifiers:
- The first is that most policies don’t let you go more than 90 days without putting people on your company plan. This is because of regulations set in place after the implementation of the Patient Protection and Affordable Care Act in March of 2010.
- The second is the number of hours your employees work on average. All workers have to be offered a company plan, but people who work part-time sometimes don’t have to contribute. Your full-time employees will have to contribute up to a certain percent if it’s just them and up to a different percent if it’s them and their family.
Before making any decisions, check with your insurance provider or plan administrator to see what your plan requires. You can also check the website of your state’s Marketplace for health and dental insurance for company coverage. Many states have group plan minimums for the number of people covered, so if you have employees in multiple states or only one or two people on your team, this option may not work for you. One of the downsides to company health insurance plans is that they can become a paperwork hassle if you have fluidity in your workplace.
A health insurance stipend puts extra money in your employees paycheck that’s intended to be put toward health insurance. Stipends without the proper legal framework must be treated as taxable earnings in payroll. For example, if you paid $500 per month to an employee to be used toward their health insurance, it would be taxed at their standard withholding rate and you would pay the employer taxes on that amount. Offering stipends is a comparatively easy method of providing your employees with health insurance. This can work for some employers, but is tax-inefficient in general and may cost you more than putting employees on your company plan.
Offering a QSEHRA
If you’re a smaller employer and won’t be offering group health coverage to your employees, you can still help them pay for medical expenses by offering them a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). These agreements are a tax-advantaged tool that allow small businesses with less than 50 employees to reimburse their team tax-free for health expenses. QSEHRAs work well in workplaces with high turnover or seasonal work, because you don’t have to worry about enrollment and all of the paperwork that goes along with it.
You’ll have to collect proof of payment from your employees before you can distribute the stipend as tax free earnings, but QSEHRAs can be a cost-effective way to offer health insurance if your business doesn’t have a company plan in place.
It’s important to note that with QSEHRAs, you can’t offer a group plan at the same time. It’s one or the other. This means that as a business owner, if your personal health insurance coverage is currently through your business, you would have to stop that insurance and get a personal plan if you want to offer QSEHRAs to your employees, which could be more costly to you. If your business has more than 50 employees you can use an Individual Coverage Health Reimbursement Arrangement (ICHRA).
Figuring out how to provide your employees with competitive healthcare benefits is important, but it doesn’t have to be stressful. Your employees will benefit whether you choose to offer healthcare through a company plan, stipend, or QSEHRA.
To learn more about other benefits to consider offering your employees, read our Wellness Benefits blog here.