Last year, 2018, marked the second full year small businesses had access to the qualified small employer health reimbursement arrangement (QSEHRA). PeopleKeep examined this period recently in our original study, The QSEHRA: Annual Report 2019.
In many ways, small businesses used the QSEHRA much the same way as they did in 2017. In total, they offered similar allowance amounts and their employees used about the same percentage of their available allowance as they did last year.
However, with an additional year of data behind us, we can draw new conclusions about how small businesses are using the QSEHRA now and what that means for reimbursement-based health benefits in the future.
In this post, we’ll go over five of the most important conclusions we drew from The QSEHRA: Annual Report 2019.
Let’s dive in.
1. Small businesses offering the QSEHRA recognized its value and offered employees more money in 2018.
While the total population of businesses using the QSEHRA didn’t waver too much in terms of the average allowance amount it gives employees, those businesses that offered the QSEHRA in both 2017 and 2018 did increase their average monthly allowance amounts.
Specifically, these businesses offered allowances that were 6 percent larger for single employees and 7 percent larger for employees with families than the allowances they offered these groups in 2017.
To PeopleKeep, this suggests that businesses who use the QSEHRA recognize its value and are investing more into the benefit as a result. Next year, we expect to see these allowance amounts increase further.
2. Small businesses make QSEHRA allowance decisions based on company size and industry.
Of the many factors that go into how small businesses decide their QSEHRA budget, the two most influential were company size and industry.
Smaller companies tended to offer larger allowance amounts. Those with between one and nine employees offered an average $299 for single employees and $452 for employees with a family. That’s compared to companies with between 10 and 25 employees, which offered an average $276 for single employees and $381 for employees with a family.
Finally, companies with more than 25 employees offered an average $264 for single employees and an average $406 for employees with a family.
This may speak to smaller companies’ greater budget or their increased need to retain the employees they have.
There was also a strong correlation among average allowance amount and industry. Employees in the technology, accounting, and legal sectors received higher allowances among both single employees and those with a family.
Single employees also received comparatively more if they worked in the construction sector while employees with a family received more from religious organizations.
This likely points to the increased hiring and retention needs among businesses in these sectors, as well as the demographics of each.
3. Employees use their QSEHRA for critical health care expenses.
There is a wide array of expenses reimbursable through the QSEHRA, including unexpected items like massage or acupuncture. While some businesses express trepidation regarding these items, the data shows that most employees are using their QSEHRA to reimburse standard, critical health care expenses.
By far the most common expense reimbursed through the QSEHRA was individual health insurance premiums. A full 38 percent of employees submitted a premium for reimbursement, including a higher proportion of single employees who are less likely to have group insurance through a spouse or family member.
When it came to nonpremium expenses, the data again suggests employees are using their funds to reimburse standard items and services. The most requested reimbursements were for:
- Medical office visits (requested by 51 percent of employees who submitted a nonpremium expense)
- Prescription drugs (43 percent)
- Dental care (40 percent)
- Eyeglasses (28 percent)
- Chiropractic (12 percent)
These figures should persuade small businesses concerned about employee QSEHRA use that this benefit is, in fact, used for very meaningful health care.
4. Employees use their QSEHRA to benefit their families, too.
The QSEHRA is automatically available to all full-time employees and their families, and PeopleKeep data suggests that employees are taking advantage of that.
Not only are employees using the QSEHRA to benefit themselves, but they’re also changing their behavior to accommodate the needs of their families.
While the average number of nonpremium expenses reimbursed for employees during the year was 12, that number fluctuated depending on the employee’s family status. Single employees requested an average total of seven expenses be reimbursed, while employees with a family requested reimbursement for 15 expenses on average.
Those reimbursements totaled $1,180 for single employees and $2,112 for employees with a family on average, with the average total increasing alongside the number of the employee’s dependents.
This demonstrates a utility with the QSEHRA that group plans—at least when they exclude family members from coverage—don’t provide.
5. There’s appetite among small businesses for the individual coverage HRA (ICHRA) in 2020.
Last year, the Departments of the Treasury, Labor, and Health and Human Services proposed regulations that would create a new health reimbursement arrangement: the individual coverage HRA, or ICHRA.
The ICHRA functions much the same way as the QSEHRA, but carries fewer of its guidelines. One of the biggest differences between the two is that while the QSEHRA imposes annual allowance caps ($5,150 for single employees and $10,450 for employees with a family in 2019), the ICHRA has no such restriction. Businesses can offer as little or as much as they like through the benefit.
Data from The QSEHRA: Annual Report 2019 suggests there is appetite for this feature among a significant portion of small businesses. Last year, 26 percent of single employees and 10 percent employees with a family received the maximum annual contribution limit from their companies.
This illustrates a desire among many businesses to give employees more value through a reimbursement-based benefit than is available through the QSEHRA. With an ICHRA, these businesses can offer employees even more in monthly and annual allowances.
The QSEHRA had another successful year in 2018, helping thousands of small businesses offer employees health benefits. The use of the QSEHRA even points to a larger appetite for other reimbursement-based benefits, including the ICHRA.
In 2020 and beyond, PeopleKeep expects these trends to continue, with more businesses offering HRAs and increasing the value they provide to employees through them.
For more information on the QSEHRA in 2018, check out The QSEHRA: Annual Report 2019.