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Small Business Employee Benefits and HR Blog

The Ideal Companies for Premium Reimbursement of Individual Health Insurance

September 10, 2014
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Companies of all shapes and sizes are adopting premium reimbursement plans. From our experience setting up employers with premium reimbursement solutions since 2006, however, we've learned there are three ideal company types for premium reimbursement plan of individual health insurance.ideal_customer_premium_reimbursement

Whether you're a health insurance professional or CPA helping a client evaluate premium reimbursement plans, or an employer yourself, here are three profiles of customers likely to be the happiest with premium reimbursement of their employees' individual health insurance. 

1. Small Businesses (< 50 Employees) Without Health Benefits

Small businesses without health benefits, who want to start offering health benefits for recruiting and retention, are the best prospects for a premium reimbursement plan.

Why? They have likely shopped for group health insurance and either been priced out, or cannot meet minimum participation requirements. Reimbursing employees for their individual health insurance premiums helps them solve these challenges and allows them to offer health benefits.

These additional characteristics make businesses in this market even stronger premium reimbursement prospects:

  • They want to offer health benefits (they want to contribute toward employees’ health care)

  • They’re worried about losing employees because they don’t offer health benefits

  • They fear losing new hires because they don’t offer health benefits

  • They’re looking to grow the business and increase or maintain staff size

  • Group health insurance is too expensive, or they don’t qualify

  • They have an automated payroll system in place (payroll software, or through a payroll vendor)

Premium reimbursement is also an ideal solution for small businesses (<50 employees) because they are not subject to the employer shared responsibility provision.

2. Small Businesses (< 50 Employees) With Health Benefits

Small businesses with health benefits can also be ideal premium reimbursement prospects if they are struggling with the cost of group health insurance.

Why? Premium reimbursement of individual health insurance addresses this challenge by allowing the employer to fully control the cost of the health benefits and predict the cost year after year. The employer can contribute any amount (no minimum or maximum contribution amounts), and there are no annual renewal fees or increases. 

These additional characteristics make businesses in this market even stronger premium reimbursement prospects:

  • Group health insurance is becoming too expensive, or they cannot afford their renewal

  • They can no longer meet minimum participation requirements

  • They have employees in multiple states

  • They’re looking to grow the business and increase or maintain staff size

  • Group health insurance is too expensive, or they don’t qualify

  • They have an automated payroll system in place (payroll software, or through a payroll vendor)

Premium reimbursement is also an ideal solution for small businesses (<50 employees) because they are not subject to the employer shared responsibility provision.

3. Medium Businesses (50-99 Employees) With Health Benefits

Medium businesses with health benefits are also ideal prospects for premium reimbursement of individual health insurance if they are struggling with the cost of group health insurance.

Why? Premium reimbursement addresses these challenges because the business can set and control the cost of the health benefits. The business can contribute any amount (no minimum or maximum contribution amounts), and there are no annual renewal rate increases, and no annual renewal fees.

These additional characteristics make businesses in this market even stronger premium reimbursement prospects:

  • Group health insurance is too expensive

  • They’ve experienced reduced employee happiness due to reduced benefits

  • Group health insurance is too time consuming to administer

A consideration for businesses with 50+ employees is that the ACA “play or pay” mandate will apply to them. In other words, they will need to conduct a financial analysis to compare: 

  • The cost of ACA-qualified group health insurance

  • Penalties alone for not offering group health insurance

  • Penalties + Monthly Healthcare Allowances

For more on these options see: Affordable Care Act -- Play or Pay?

What type of companies have you seen benefit the most from premium reimbursement solutions? Leave a comment or question below.

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