Due to the rising costs of group health insurance plans, employers are looking for more affordable solutions to offer employees health benefits. Many are turning to Health Reimbursement Arrangements (HRAs), which allow your company to provide tax-free reimbursements to workers for healthcare expenses. Here’s a look at five advantages of HRAs for businesses and their employees.
Group health insurance plans have become consistently more expensive over the years, and annual rate hikes when it’s time to renew. Consequently, it’s becoming increasingly difficult for small businesses to adopt group plans. Offering each employee an individual health policy, though, is more affordable. The HRA model allows employers to provide workers with a fixed monthly allowance to spend on healthcare expenses.
HRAs come with health insurance subsidies, also known as premium tax credits, for low-income individuals through health insurance marketplaces. Group insurance plans, by contrast, are more expensive to begin with and don’t offer subsidies. Providing employees with a stipend, which is a fixed allowance and isn’t tax-free, makes HRAs the more attractive option.
The main problem with offering a one-size-fits-all group plan is that it doesn’t give individual employees choices in which doctors they see, coinsurance, or monthly costs. Reimbursing employees for their healthcare expenses at least allows them to choose their own doctor, plan, and budget. Without this flexibility, some employees may decide to look for other work since customized healthcare is more appealing.
Due to the complexity of requirements and lack of flexibility, many small and medium businesses are finding it hard to embrace group insurance plans. A group plan typically requires a minimum number of employees to be listed, which isn’t going to work for teams comprised of workers who want control over their healthcare coverage. If several workers are already enrolled in Medicare and family plans or don’t want to opt-in, your company may not even be able to offer a group plan. Your company will be free of such restrictions through HRAs.
Insurance portability means employees can take their health plans with them if they switch to a new employer. Many workers want this flexibility since it’s becoming more common for people to reassess their careers. Providing the HRA option shows you care about the health and wellbeing of your employees while allowing them to have flexibility in planning their future careers.
Health Reimbursement Arrangements are more attractive than group plans for a growing number of small businesses these days. HRAs create less friction for both employers and employees while providing more flexible coverage. Letting workers choose their own health networks and doctors gives your company an edge in attracting new talent. Contact us at Abatelli Group Inc. for more information on securing the right healthcare plan for your business.