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Small Business Employee Benefits and HR Blog

Individual Health Insurance Reimbursement for Small Practices

November 24, 2014
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Small businesses are significant economic movers in the United States. Approximately 54% of all U.S. sales and 66% of all net new jobs come from businesses with fewer than 100 employees. In fact, according to the Census Bureau, companies with fewer than 100 employees comprise 98 percent of existing U.S. firms.Individual_Health_Insurance_Reimbursement_for_Small_Practices

Professional Practices Tend to be Small Businesses

Professional practices, including medical, legal, financial, dental, and veterinary clinics, are especially likely to be small businesses. The Statistics of U.S. Businesses report that approximately 90 percent of these service-oriented practices have fewer than 20 employees.

These small practices are among the hardest hit by increasing costs of group health insurance. The percentage of small to medium-sized businesses offering health benefits to their employees dropped 11 percent from 2010 to 2013.

Small Practices Can Still Provide Health Benefits

Small practices can still offer employer-provided health benefits. Group health insurance is not the only option for small professional practices. In fact, more and more businesses are moving away from the group policy model toward the individual health insurance reimbursement model.

Individual health insurance reimbursement for small practices is particularly effective at controlling costs, saving time, and creating employee choice.  

How to Structure an Individual Health Insurance Reimbursement Plan

To create an individual health insurance reimbursement for small practices, business owners may establish a Section 105 healthcare reimbursement plan. Many companies will pursue using software solutions to manage plan construction and compliance. This self-insured medical expense reimbursement plan is structured to reimburse employees for:

  1. Health insurance premiums up to a specified monthly healthcare allowance, and

  2. Limited preventive care as required by PHS Act Section 2713.

To help limit the preventive care liability, an employer could require employees to show proof of having non-grandfathered minimum essential coverage to be eligible for the HRP. That way, the employee receives 100% preventive care services via their own health insurance plan (e.g. an individual plan or spouse’s employer plan).

HRPs reimburse insurance premiums, a non-essential health benefit, and preventive care services per the stipulations in PHS Act 2713.

Why Individual Health Insurance Reimbursement Makes Sense for Small Practices

Many professional practices need the flexibility to provide their employees with reimbursement allowances based on their employee classes, the controllable costs of knowing their maximum reimbursement thresholds, and the minimal time commitment when using a reimbursement software provider.

For small practices who are facing dwindling options for enrolling in group insurance policies, individual health insurance premium reimbursement is not only a viable solution, but often the best solution.

What questions do you have about individual health insurance reimbursement for small practices? Leave a comment or question below.

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