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How a group coverage HRA can help nonprofits

Written by: Josh Miner
September 3, 2020 at 8:12 AM

According to a recent employee benefits survey, when choosing between a high-paying job and a lower-paying job with quality health benefits, 88% of employees would consider the lower paying job. A whopping 54% of employees would “heavily consider” this tradeoff.

Nonprofits know this, which is why 47% of nonprofits with fewer than 50 employees offer a health benefit. Since these organizations have fewer than 50 employees, they are not legally required to offer a health benefit—they do it because it helps them recruit employees. As budget-conscious nonprofits seek to offer employees the best healthcare they can, a group coverage HRA can be an ideal solution.

The cost/quality tradeoff

Like death and taxes, increasing health insurance premium costs have become a near certainty. Unfortunately for many nonprofit organizations, increased budgets aren’t as predictable. Each year, nonprofits must balance benefits and pay raises with other organizational costs. Many find themselves switching to higher deductible plans to keep costs in check. However, as the survey above suggests, trimming health benefits may increase employee turnover and hurt morale.

See how much it costs to lose an employee

Eliminate the cost/quality tradeoff with a group coverage HRA

A group coverage HRA enables nonprofit organizations to reimburse employees tax-free for expenses that go toward their deductible, including copays and out-of-pocket expenditures. This allows organizations to minimize the impact of a switch to a higher deductible plan, while minimizing the impact on employees.

Suppose an organization is facing an increase in costs to keep their employees’ deductible the same. Instead of spending more, the organization could maintain or even reduce premium costs by switching to a higher deductible plan. The organization could then offer employees an allowance that would make up the difference between the old and new deductible with a group coverage HRA. This keeps employees’ effective deductibles the same. Customers have told us this approach nearly always delivers a net savings.

While HRAs serve a similar function to HSAs, they operate in a way that can give further relief to budget-conscious organizations. Unlike HSAs, which are employer-funded accounts that are a fixed draw on the budget, HRAs are reimbursement arrangements, so the organization only incurs costs when employees actually use their health benefits. And a group coverage HRA isn’t portable—the employee doesn’t keep the benefit when they leave their nonprofit. The employer will only have to reimburse employees for expenses incurred prior to their departure.

Conclusion

As more and more nonprofits find themselves increasing the deductible of their health plans to save money, pairing them with a group coverage HRA is a great way to do so without affecting the quality of the benefit or the wellbeing and morale of employees.

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Topics: Nonprofit, Group Coverage HRA

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