When it comes to health benefits, controlling costs has become a major challenge for small nonprofit organizations. Each year, leadership teams are faced with tough fiscal decisions at health insurance renewal time: increase the budget again, reduce coverage, change health benefits, or cancel benefits. These are challenging conversations to have. Nonprofits need quality health benefits to attract and retain employees, but with affordable and controllable costs.
To gain control over health benefits budgets in both the short-term and the long-term, nonprofits are switching from group health insurance to individual health insurance reimbursement. Why? There are four main reasons.
Note - This article is an excerpt from our new eBook, The Nonprofit Guide to Individual Health Insurance Reimbursement. To download the full resource, click here.
1. Group Health Insurance is Becoming Too Expensive
When it comes to health benefits, controlling costs has become a major challenge for small nonprofits. Over the past fifteen years, the average national cost to cover an employee with group health insurance has increased 174 percent. That is an average of 12 percent per year (Kaiser Family Foundation, 2014).
For many small nonprofits, group health insurance is simply becoming too expensive. With limited resources and lean budgets, leadership teams must be strategic about how to allocate compensation and benefit dollars.
Related - 4 Tips for Finding Affordable Healthcare for Your Nonprofit
2. Individual Health Insurance Reimbursement is Affordable
As nonprofits struggle to budget for group health insurance, individual health insurance reimbursement offers a more affordable model of health benefits. It is a cost-effective health benefits approach because:
The nonprofit sets the amount to contribute to employees’ healthcare expenses (there is not a required amount to contribute).
On average, individual health insurance costs less than comparable group health insurance premiums. So, the nonprofit’s health benefits dollars are stretched further.
3. Nonprofits Need Fiscal Predictability and Control
The third reason small nonprofits are adopting individual health insurance reimbursement is because nonprofits need fiscal predictability and control.
With individual health insurance reimbursement, the nonprofit has control over the cost of the health benefits program in the short-term and in the long-term. The only time the cost increases is if the nonprofit decides to increase the reimbursement allowances or hire additional staff.
For nonprofits, having predictable and controllable costs year to year adds much needed stability to the budget and provides accountability to the board and funders.
4. Individual Health Insurance Has New Advantages
Individual health insurance has new advantages that make it just as good, and in some cases better, than group health insurance.
Because of health reform, individual health insurance is now guaranteed-issue; meaning all employees are eligible for coverage regardless of health conditions. And, individual health insurance costs less.
With individual health insurance, employees get to:
Pick the plan that best fits their unique needs, including the networks and doctors.
Keep the plan for as long as they want, completely independent of employment.
Receive a federal subsidy for, on average, about half the cost. Families who earn less than $100,000 per year or a single person earning less than $46,000 per year may be eligible.
Nonprofit organizations value taking care of their loyal, hardworking employees. And yet, the traditional way of offering health insurance is becoming unaffordable. As leadership teams and the board of directors start asking for more affordable and sustainable ways to offer health benefits, one alternative solution is individual health insurance reimbursement. This approach is being widely adopted by small nonprofits because it is affordable, sustainable, and provides employees access to quality health insurance.
What questions do you have about individual health insurance reimbursement for nonprofits? Download this PDF guide or leave a question below.