Are HRAs or HSAs a better nonprofit benefit offering?
December 20, 2021 at 9:00 AM •
Written by: Elizabeth Walker
In recent years, increasing health insurance costs have become inevitable. Unfortunately for many nonprofit organizations, increased budgets aren’t as certain. Each year, nonprofits must balance benefits and pay raises with their other organizational costs.
Why offering employee benefits as a small nonprofit is worth it
A robust benefits package for a nonprofit is a powerful tool for recruiting and retaining great talent, which can be a huge plus if your salaries aren’t as competitive as other for-profit companies.
According to a SHRM benefits survey, 90% of respondents ranked a health benefit as the most valuable employee benefit to them. Offering a comprehensive health benefits package is a proven way to stay competitive while keeping your employees healthy and happy.
On the other hand, there is no requirement or penalty for employers with less than 50 full-time employees (FTEs) to provide health insurance. The Affordable Care Act (ACA) only mandates applicable large employers (ALEs) to provide affordable and qualified health insurance to their employees.
However, while not offering health benefits may save you money in the short-term, cutting this benefit may cause a spike in turnover and hurt morale—costing you far more in the long-run.
How can nonprofits offer more robust health insurance?
One way nonprofits with 50 or fewer FTEs can find affordable and comprehensive plans is through the SHOP (Small Business Health Options Program) Marketplace. With SHOP, brokers can help you select small group plans through an exchange. Nonprofits aren’t required to use the SHOP Marketplace, but you are eligible for it as long as you have fewer than 50 employees.
Using SHOP qualifies nonprofits to claim the small business health care tax credit, which can help them afford a more robust group health plan. If you don’t want to utilize the SHOP method, you have the option of supplementing a HDHP with an HSA or a GCHRA for a more well-rounded and cost-effective health benefit.
Health savings accounts (HSAs)
An HSA lets you and your employees set aside pre-tax money to pay for qualified medical expenses. By using pre-tax dollars to pay for deductibles, copayments, coinsurance, and other expenses, employees are able to lower their overall healthcare costs. Plan holders can use their HSA to pay for 200+ eligible expenses, as outlined in IRS Publication 502.
Each year, the IRS updates the HSA contribution limits for individuals and families. If you’re new to HSAs, it helps check beforehand which insurance plans are HSA-eligible so you can guarantee you’re selecting the right plan before you purchase.
As budget-conscious nonprofits seek to offer employees the best healthcare they can, a GCHRA can be an ideal solution. While HRAs are similar to HSAs, they operate in a way that can give further relief to nonprofit organizations.
With a GCHRA, also sometimes called an “integrated HRA,” employers are able to set their own allowance to reimburse employees, tax-free, for out-of-pocket healthcare expenses before they meet their deductible. This includes copays and other cost sharing expenses This allows organizations to minimize the impact of an HDHP for employees.
A GCHRA also isn’t portable—the employee doesn’t keep the benefit or allowance when they leave their nonprofit. The employer only reimburses employees for expenses incurred prior to their departure. Also, unlike other HRAs, employers aren’t restricted to compatible plans through any individual provider and can keep their HRA even if they change providers.
As more nonprofits find themselves increasing their health plan deductible to cut costs, supplementing the plan with a GCHRA is a great way to increase benefit quality and employee morale. While HSAs mainly help individuals save money for healthcare, GCHRAs do more by allowing employers to reimburse employees' for their out-of-pocket medical expenses.
If you think a GCHRA is the way to go for your organization, PeopleKeep can help! Schedule a call with one of our personalized benefits advisors and we’ll get you on your way.
This article was originally published on September 3, 2020. It was last updated December 20, 2021.
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Elizabeth Walker is a content marketing specialist at PeopleKeep. She has worked for the company since April 2021. Elizabeth has been a writer for more than 20 years and has written several poems and short stories, in addition to publishing two children’s books in 2019 and 2021. Her background as a musician and love of the arts continues to inspire her writing and strengthens her ability to be creative.