Each year, CEOs sit down with their benefits administrative staff to review the company’s annual budget. Projections are made for revenue, funding, and expenses. All too often, this includes healthcare increases of 10 percent, 20 percent, or more.
To gain control over the business’s healthcare budget, many administrative staff are proposing a switch from group health insurance coverage to a Section 105 Medical Reimbursement Plan. Section 105 Plans are the foundation for individual health insurance reimbursement.
Why the switch? Individual health insurance reimbursement is a smart way to control costs while providing employees a valuable and appreciated health benefit. Small businesses work hard for every cent the company brings in. This approach helps healthcare dollars go further.
Which brings us to where you are today. Your HR staff is ready to make the switch, but how do you explain a Section 105 Plan to the CEO? Here are eight quick topics to start the conversation.
1. A Section 105 Plan is a formal health benefit
Using a Section 105 Plan, the business offers a formal, tax-advantaged health benefit to employees. But, it works a little different than offering traditional health insurance coverage.
Instead of contributing to a group health insurance policy, the company uses a Section 105 Plan to give employees an allowance to spend on health insurance. Employees purchase their own health plan and are reimbursed by the Section 105 Plan.
2. Employees have access to quality health insurance
Employees have different medical and financial needs. A one-size-fits-all health insurance policy does not always meet the unique needs of your workforce. With a reimbursement program, employees pick any plan and pick their carrier, doctors, and coverage level.
Using a Section 105 Plan, the company gives employees a “budget” to spend on health insurance.
3. Healthcare costs are reduced by 20 to 60 percent
With a Section 105 Plan, the business sets and controls the contribution amount and, on average, individual health insurance costs up to 60 percent less than group health insurance in every state.
These two factors create cost savings and cost predictability for small businesses.
4. Costs are controllable and predictable
With a reimbursement program, there are no unpredictable annual increases and no minimum contribution requirements. Any budget increases or decreases are in the hands of the business.
This type of model provides cost predictability and accountability.
5. Employees’ costs are lower, too
On average, employees will pay less out of pocket for the same coverage. As mentioned earlier, individual health insurance costs less, and eligible employees can receive federal subsidies to lower their premium even more.
6. Benefits can be tailored to support the company’s HR goals
The company can tailor the Section 105 Plan to meet its hiring and retention goals. For example, the company can design the Section 105 Plan to provide different allowance amounts by group of employee and/or family status.
7. Using a Section 105 plan, reimbursements are tax-free
Similar to contributions to a group health insurance plan, reimbursements made through a Section 105 Plan are tax-free.
8. Software makes administration easy & compliant
Companies use Section 105 Software (such as PeopleKeep) to administer the health plan in 5 to 10 minutes a month.
Software also automates compliance with the ACA and other federal requirements (ERISA, HIPAA, IRS, and COBRA if applicable).
As companies switch to individual health insurance reimbursement it is common for administrative staff, leadership, and employees to have questions about what a Section 105 Plan is and how it works.
What additional questions do you have? Leave a question below.