Health insurance for companies with employees in multiple states

January 20, 2020
Health Insurance Options for Companies with Employees in Multiple States

If you have workers spread across multiple states, you likely face unique challenges when it comes to providing health insurance to your employees.

State-specific insurance requirements often make it difficult to cover every employee under a single plan. Fortunately, there are several ways to address this problem, which we list below.

The challenges of having workers in multiple states

Businesses whose workers live in various parts of the country must contend with a variety of obstacles that can limit their options when it comes to group health insurance.

For example:

  • Businesses don't qualify for group health insurance due to state-specific insurance requirements. Insurance carriers must comply with federal rules, but they’re regulated at the state level, and some carriers won’t cover out-of-state employees. Others will permit coverage for out-of-state workers only when a majority of eligible employees are located in the same state.
  • Out-of-state workers don’t qualify for the company group plan, but the company wants to find a way to cover them.
  • Employees pay for their own private coverage, but would like the company to pitch in.
  • Businesses find it too difficult to navigate the complex multi-state rules in the SHOP marketplace.

If these sound like familiar struggles, you have three options:

  1. A national plan
  2. Separate state plans
  3. A health reimbursement arrangement (HRA)

Health insurance option 1: offering a national plan

Offering a national plan eliminates 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 is left out when it comes to coverage.

However, options are limited as few insurance carriers offer national plans. Additionally, this convenience could come with a hefty price tag, which could put it out of reach for many small businesses.

Health insurance option 2: offering separate state plans

Another option is to offer separate state plans to accommodate workers in multiple states. This allows employees to receive coverage that’s tailored to their needs and preferences.

On the downside, managing multiple policies can be a complicated and time-consuming prospect—especially for a small business. Additionally, businesses located in a state with its own health insurance exchange must create an account for each marketplace rather than using a single account through the federal exchange.

Health insurance option 3: offering an HRA

A third option for businesses with multi-state employees is to offer a health reimbursement plan, or HRA, like the qualified small employer HRA (QSEHRA) or the individual coverage HRA (ICHRA).

With an HRA, businesses set a fixed monthly allowance for all employees regardless of which state they call home. The employees then purchase an individual policy and request reimbursement for the premium (along with other qualified out-of-pocket expenses) from the business.

This allows employees to select the coverage that best suits them, it ensures that everyone receives the same amount of money to put toward their insurance policies and medical costs, and it eliminates many of the administrative headaches associated with group health insurance. As an added bonus, an HRA typically saves businesses money on payroll taxes.

Conclusion

Group health insurance doesn’t work for everyone, and other solutions for employees working in multiple states can be expensive and complicated. Whether you employ workers across the state line or across the country, an HRA might be a better fit for your employees’ needs as well as your company’s bottom line.

Has your company saved money by switching from group health insurance to an HRA? Let us know in the comments below.

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