Many small businesses are forgoing offering healthcare benefits to their employees due to the rising costs of group health insurance. This puts them at a disadvantage when trying to recruit and retain key employees, as healthcare benefits are an extremely desirable part of most compensation packages.
Small businesses are facing double-digit premium increases at renewal time this year. Since with group insurance, the premium cost is typically split between the employer and employee, both parties are exposed to higher healthcare costs. In fact, small business health insurance costs have nearly doubled since 2009, with 91 percent of small businesses reporting increases in their health plan at their most recent health insurance renewal.
A common misconception about individual health insurance is that it is more expensive than group health insurance coverage through an employer. In fact, individual health insurance costs up to 60 percent less than group health insurance. In the federally-run Marketplace, 87 percent of those who selected a health plan are receiving premium tax credits, and are paying an average of $82/month.
This is a large part of the reason many small employers are dropping their group health insurance coverage to help their employees payfor individual health insurance policies. By reimbursing employees' individual health insurance premiums, small businesses can save money, while still offering a desirable and competitive compensation package for employees.
Employer-Funded Individual Health Insurance
As a quick overview, by reimbursing your employees' individual health insurance premiums, your business:
Sets any amount to contribute to employees' health insurance
Gives employees tax-free health care allowances using reimbursement software
Reimburses employees on payroll for approved premiums expenses
Your financial liability is controllable, and employees shop for policies that best meet their individual health needs.
4 Ways You Control Health Benefits Costs by Reimbursing Employee's Individual Health Insurance Premiums
Being able to set, control, and predict all health benefits costs is revolutionary for many businesses. Here are four ways you control costs with employer-funded individual health insurance:
Your business defines the budget by setting any contribution amount toward employees’ health care. Typically, monthly health care allowances are provided tax-free via a Section 105 plan. Because there are no annual renewal increases or minimum contribution amounts, the business literally controls all health benefits costs.
Employees purchase individual health insurance policies and submit their expense for reimbursement. Your business reimburses employees directly on payroll tax-free. With this type of approach, pre-funding of third party bank accounts is not required.
Your business only reimburses employees for eligible premiums, up to the amount of their health care allowance.
If an employee leaves, any unused allowance amounts stay with your business.
These four aspects of a employer-funded individual health insurance give you financial control and predictability, while creating health benefits that make employees feel valued, loyal, and happy.
What questions do you have about controlling health benefits costs with employer-funded individual health insurance? Let us know in the comments below.