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Small Business Employee Benefits and HR Blog

2 Ways to Address a Double Digit Rate Increase

The Biggest Tax Exclusion - Employer Paid Health Insurance

One of the biggest tax exclusions in the U.S. is the exclusion that allows workers who get job-based (or "employer paid") health insurance coverage not to pay taxes on the value of those policies and employers to deduct the cost as a business expense. The exclusion costs the Treasury an estimated $246 billion annually, according to Congress’ Joint Committee on Taxation, dwarfing the second-largest break, the mortgage interest deduction, which costs an estimated $98 billion.

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2 Ways to Address a Double Digit Rate Increase3302646512_0ff21724a0_z

Employers with group plans have already seen their premiums more than double over the past decade—increasing at 10% to 20% with each annual renewal. Here are two options that can be used to offset a double digit rate increase:

Option 1 - Raise the Deductible and Offer a GroupHRA.

The simplest and most cost-effective change for employers to reduce the monthly premium on their group policy is to increase the annual deductible up to $2,500-$5,000 per employee per year. This will reduce the total monthly premium by up to 50%, a cost savings typically shared by both employers and employees. Then, use a portion of the premium savings to offer a tax-advantaged Health Reimbursement Arrangement (HRA) to subsidize some or all of the increased medical expenses incurred by employees due to their higher annual deductible.

Option 2 - Cancel the Group Plan and Offer a ZaneHRA

Starting in 2014, the best decision for many employers and their employees will be to eliminate their company-sponsored health insurance in favor of a defined contribution HRA solution. That’s because employees no longer need employers to purchase quality health insurance, and, starting in 2014, employees earning less than 400% of the FPL (~$92,000 for a family of four) per year who purchase a personal policy will receive a large federal subsidy on their premium if their company doesn’t offer a group plan. As a result, virtually every employer with less than 50 employees will switch from group coverage to simply giving employees tax-free allowances via an HRA to purchase their own individual policy. And many large employers will follow suit once they realize how large of a subsidy their employees receive if the employer doesn’t offer group coverage. 

Get Trained on Zane's HRA Products!

introduction to zanehra

Introduction to ZaneHRA for Insurance Agents and CPAs

With ZaneHRA, employers offer a defined contribution health plan in which they make available monthly contributions ("allowances") that employees choose how to spend. Watch Webinar On Demand
zanehra software demo

ZaneHRA Software Demo

The ZaneHRA software allows an employer to offer health benefits in less than 5 minutes per month. Watch Webinar On Demand
qualifying prospects for zanehra

Finding and Qualifying Prospects for ZaneHRA Training

Companies that typically setup ZaneHRA either do not offer group health insurance currently or are canceling an existing health benefits program. Learn how to find businesses that need ZaneHRA! Watch Webinar On Demand
Introduction to GroupHRA

Introduction to GroupHRA for Insurance Agents and CPAs

With GroupHRA, employers reduce the premium on their current group policy by increasing employee exposure (e.g. raising the deductible). GroupHRA works best for companies that offer group health insurance and want to save money without canceling (or reducing) employee coverage. Watch Webinar On Demand