Health insurance for employees in multiple states

As more organizations switch to remote environments, employers have greater flexibility to hire from all over the U.S. Having a multi-state workforce is great for recruiting efforts and growing your business. But it can make offering health coverage to employees challenging.

Not all health insurance companies have the same network coverage in every state. And even among those that do, medical care providers may not offer the most cost-effective networks for out-of-state employees.

This blog will show you four ways to offer a comprehensive health benefit to your employees in multiple states so you can better support your workers regardless of where they live.

1. National group health insurance plans

Your first option is offering a national group health plan. National group health insurance is a health plan available to employees all over the U.S. Offering a national plan keeps you from managing each state’s different regulations on health insurance.

National plans also end the need to keep track of multiple states’ rules, notifications, and underwriting guidelines. All employees receive the same group health insurance regardless of where they live, and no one misses out on quality coverage.

A significant downside is that only some health insurance companies offer multi-state plans. So, you’ll likely have a limited selection of plan types with higher premium prices.

2. State health insurance plans

Another effective option for employers is offering separate state plans to your staff in various locations. These types of plans allow employees to receive essential coverage tailored to their area, needs, and preferences.

Your health insurance choices will vary depending on which insurers offer coverage in each state. Therefore, you should check which healthcare providers are available within a particular plan network.

A good place for small businesses to get started is the Small Business Health Options Program (SHOP) Marketplace¹. SHOP is a federal program that helps small business owners provide health insurance coverage to their employees.

If you enroll in a SHOP plan in the state where your primary business site resides, you can offer your multi-state employees' SHOP coverage in two ways:

1. Choose a single health plan for all employees.
   1. Remember to choose a medical plan with a multi-state or national provider network.
2. Offer different SHOP plans in each state where your employees work.
   1. As long as your business meets all requirements to take part in the state's SHOP, you can offer comprehensive coverage even if you have one employee in a location.

While SHOP plans are available in most states, they aren’t an option in locations with their own state-based health insurance exchange. Another downside is that many employers can find managing multiple policies complicated and time-consuming.

3. Health reimbursement arrangements (HRAs)

You can break free from group health insurance with a health reimbursement arrangement (HRA). With an HRA, businesses set a fixed monthly allowance for all eligible employees to get reimbursed for qualified out-of-pocket costs—including their individual health insurance premiums—regardless of where they live in the U.S.

The following are two types of HRAs you can leverage to build a multi-state health benefit:

1. The qualified small employer HRA (QSEHRA) is for small businesses with fewer than 50 full-time equivalent employees (FTEs). This type of HRA has annual maximum contribution limits, but no minimum allowance requirements. It can coordinate with an employee’s premium tax credits and is flexible enough to meet every employee’s needs.
2. The individual coverage HRA (ICHRA) is for businesses of any size and can cover individual premium costs and other out-of-pocket expenses. Unlike QSEHRAs, ICHRAs have no contribution limits, and employees must choose between the benefit and premium tax credits based on affordability. The ICHRA offers employers more flexibility by enabling them to personalize allowance amounts and eligibility by employee class.

HRAs are an excellent way for employers to eliminate the administrative headaches of traditional health insurance while offering a comprehensive health benefit. For a multi-state workforce, a QSEHRA or ICHRA allows employees access to the best local network providers and policy options in their area.

HRAs are also free of payroll taxes for employers and employees and free of income taxes for employees as long as their policy meets minimum essential coverage (MEC).

4. Health stipends

The last way to provide employee health benefits to your workers in different states is with a health stipend.

A stipend is a fixed amount of money you can pay an employee in addition to their basic salary. You can offer a stipend as an annual lump sum, spot bonus, or on a recurring basis, like monthly or quarterly.

Health stipends are flexible in what they can cover. Employees can buy whatever medical care they choose, like prescription drugs, insurance premiums, preventive services, and more. But you can’t legally require your employees to purchase a health policy with their stipend or ask for proof that they did so.

Stipends aren’t subject to compliance considerations that impact other employee health benefits, and they’re simpler to administer. But, businesses must pay payroll tax on the reimbursements, and employees must claim the stipend as part of their taxable household income.

While stipends are taxable, they're a good option if you have many employees who qualify for premium tax credits. Employees can receive their stipend and collect their full premium tax credit as long as the allowance doesn’t substantially change their income. This differs from a QSHERA or ICHRA, where they have to reduce their premium tax credit by their allowance amount or opt out of the HRA.

However, since a health stipend isn’t a formal health benefit, it doesn’t satisfy the Affordable Care Act‘s employer mandate for applicable large employers (ALEs) with 50 or more FTEs.

What you should consider before choosing a multi-state health benefit

The health benefit you select for your multi-state workforce will likely depend on your budget, coverage preferences, flexibility, and plan availability needs. But there are a few essential tips you need to consider when looking for health insurance that will work in multiple states or ZIP codes.

A few key tips you should keep in mind are:

• Your employees’ location: If you’re considering offering a group plan, always look at the geography of the health insurance policy before purchasing. Just because a policy or health insurer is in multiple states doesn’t mean it will work in the states you need or cover all your employees’ healthcare needs.
• The premium: If you need a multi-state health insurance plan, you may have to pay a higher monthly premium. For budgeting, it’s essential to know your premium costs ahead of time and how much your employees will be responsible for paying on their end.
  • If you offer a cost-effective HRA, you’ll have more control over your health budget by being able to set an allowance amount that works for you.
• How the coverage varies: If you have a health insurance plan in multiple states, you must assess how the coverage changes from place to place. This is particularly important if you’re considered an ALE and have to comply with the Affordable Care Act (ACA)’s employer mandate. The ACA states that minimum coverage should provide affordable care for the ten essential health benefits.
  • With an HRA, employees can use their allowance to buy the individual health insurance plan in their area that best meets their needs.

Conclusion

You have several options when offering health insurance benefits to your employees in different states. The right choice for your organization will depend on your budget, coverage preferences, and other vital factors. But if you’re looking for a flexible employee benefit for your entire workforce, an HRA might be your best bet.

Whether you have workers in a single office or nationwide, PeopleKeep can help! We can set you up with a multi-state health benefits package with our HRA administration software. Contact us today, and we’ll get your benefit package up to speed.

This article was originally published on January 20, 2020. It was last updated on September 1, 2023.

1. https://www.healthcare.gov/small-businesses/provide-shop-coverage/business-in-more-than-one-state/