When Congress created the qualified small employer health reimbursement arrangement (QSEHRA), or small business HRA, many envisioned it as a vehicle for small businesses to better control their benefits budget.
Because small businesses using a QSEHRA could choose the dollar amount they would contribute to employees each month, they would no longer be at the mercy of unpredictable premium increases and other administration costs.
In The QSEHRA: Annual Report 2018, data from businesses that used the QSEHRA show the new benefit fulfilled its purpose.
In this post, we’ll use excerpts from the Annual Report to explain how the QSEHRA compared to traditional group health insurance in 2017. You can download the full report for more insights here.
The QSEHRA vs. group health: cost savings
One of the primary reasons small businesses choose to offer a QSEHRA is cost. Unable or unwilling to afford a traditional group health insurance policy, they seek a benefits option that allows them to control their budget. PeopleKeep data confirms this.
In 2017, Kaiser Family Foundation data shows that small businesses that offered a group health insurance policy spent an average $455 per employee per month for single coverage and an $900 per employee per month for family coverage.
Small businesses that offered a QSEHRA, though, committed to an average $280.20 per month per self-only employee and $476.56 per month per employee with a family. That’s a cost reduction of 38 percent and 47 percent, respectively, assuming all employees use 100 percent of their allowance.
The QSEHRA vs. group: time savings
Administration time is an important consideration for small businesses, which often have small staff sizes and require one employee to fulfill many functions.
With group health insurance, small businesses must handle ongoing regulatory changes, communication between employees and the insurance company, and annual renewal processes. These time costs add up.
Since the Affordable Care Act passed, small businesses estimate they spend 13 hours every month administering group health insurance. These time costs total more than $13,000 every year.
Small businesses must also relay communication between the insurance company and employees, including back-and-forth negotiations on coverage issues.
Finally, annual benefit renewals are complex and require a great deal of time to complete. Businesses must deal with any rate increases, consider whether to switch policies, and even consider whether to switch insurance brokers.
By contrast, some businesses choose a QSEHRA administration tool to help them offer the benefit. The QSEHRA requires little time to administer with personalized benefits automation software. Businesses using PeopleKeep in 2017 to offer a QSEHRA spent an average 15 minutes a month administering the benefit.
The QSEHRA vs. group: value
Small businesses using a QSEHRA provided employees value outside of an insurance policy.
While a group policy only provides insurance coverage, the QSEHRA provided reimbursement for nonpremium expenses to more than a quarter (27 percent) of employees who accessed at least part of their benefit.
Employees covered under a QSEHRA also chose their own insurance coverage—something not possible under a group health benefit.
Conclusion
For small businesses that cannot or do not want to offer group health insurance, the QSEHRA is a great option. It allows businesses to control costs, decrease time spent on benefits, and give employees more choice.
For more information on how small businesses used the QSEHRA in 2017, download the Annual Report here. You can also watch our on-demand 2018 annual report webinar to review the findings and how your business can use them.
