There are several options to get health insurance for employers that include small business group insurance, self-funded plans, and health reimbursement agreements. These plans differ in terms of what is covered, flexibility, cost, and reimbursements. This article attempts to look at which of the top four options might be the best option for your situation.
There are also alternatives to health insurance, such as Mira. It’s an opportunity for you to offer benefits to employees without breaking the bank. For only $25 per month, Mira offers low-cost lab tests, prescriptions, urgent care, and preventative care services to employees. Sign your team up today.
4 Best Health Insurance Options for Employers
Offering your employees health coverage is one of the most important things you can do to retain your top talent. As an employer, there are several ways that you can offer this to your employees. From a traditional self-funded plan, which can be expensive, to an affordable alternative option that helps your employees go to the doctor or get their prescriptions. Each option has its pros and cons and it’s important for you to identify the best for your personal situation.
Below we outline some of the best options to get health insurance for employers, ensuring that they can get the medical care they need instead of going without.
- Small Business Health Options Program (SHOP): You can get small business group insurance through SHOP if your business meets certain requirements, which vary by state. For example, in New York, you can qualify if you have between 1 and 100 full-time employees, but most states require you to have less than 50 employees to qualify. Premium costs are typically split between employers and employees.
- Self-Funded Plan: Self-funded plans are what many businesses offer as a traditional benefits plan. These plans divide costs into fixed and variable costs. With self-funded plans, there is greater flexibility and opportunity to save if employees do not use a lot of health care in a given year. However, these plans may end up being very costly in the case of catastrophic events that lead to high medical bills for employees.
- Health Reimbursement Agreement (HRA): HRAs are an arrangement between employers and employees where the employer agrees to make a certain amount of money available each month for employees to use on health care expenses. This money can go towards the coverage of premiums, copays, and prescriptions. Employees first pay for these services and then submit for reimbursement. There are two types of HRAs: Individual Coverage HRA and Qualified Small Employer HRA.
- Alternatives to Health Insurance: There are also ways that you can provide health coverage for your employees without purchasing insurance. Mira is an alternative to health insurance that allows employers to provide their employees access to preventative care, urgent care, prescriptions, and lab tests. Mira memberships only cost $25 per month for each of your employees.
Qualified Small Employer Health Reimbursement Agreement (QSEHRA): Best For Offering Budgeted Reimbursements
If you employ 50 people or fewer, you may qualify for a QSEHRA. With a QSEHRA, your employees pick their own insurance plans, pay for their own health services, and present you with receipts. Then you reimburse your employees a specific amount each month. If your employees do not submit reimbursements for the total amount of money they are eligible for in a given month, the employer keeps the excess funds.
All reimbursements for a QSEHRA are tax-free. In addition, to have a QSEHRA, you cannot provide your employees with a group health plan, as the purpose of QSEHRA is to reimburse employees for expenses from the health plan they choose to be covered by. QSEHRA plans differ from other HRA plans in that the maximum reimbursement is limited for QSEHRA.
Below are some of the benefits of a QSEHRA:
- Flexibility for employees: QSEHRA offers high flexibility, as employees can pick a health insurance plan that works best for their health needs. Employees can even be covered by a spouse's plan and use the funds from QSEHRA to cover co-payments and monthly premiums.
- Flexibility for employers: QSEHRAs offer flexibility for employers as well, as you can pick the budget that you would like to set for reimbursement. You can also vary reimbursement rates by the age or marital status of employees.
- Tax-free reimbursements: Employers make reimbursements without paying payroll taxes. In addition, employee income tax is also not taken into consideration when paying reimbursements.
Small Business Health Options Program (SHOP): Best For Getting Health Care Tax Credit
If you provide SHOP coverage to all full-time employees, you may be able to qualify for health care tax credit. In order to qualify, you must also have fewer than 25 full-time employees, have an average employee salary of less than $50,000/year, and pay at least 50% of your employee's premium costs.
If you qualify for the health care tax credit, it can be worth 50% of the costs that employers pay for employees' premiums and 35% of costs for employees who work for a nonprofit. If your company has fewer than 10 employees who make less than $25,000/year, your tax credit can be greater.
In addition to the health care tax credit, there are several other benefits of getting a plan through SHOP:
- High-quality plans: By using SHOP, you can pick a high-quality plan to offer to your employees. These plans are ACA compliant, offer well-known products, and have been shown to be a good retention strategy for employees.
- Guaranteed coverage: If you meet the criteria for a SHOP plan and apply for coverage, coverage is almost always guaranteed.
- Tax-free coverage: Premiums are exempt from federal income tax and payroll taxes. Premiums are typically split between the employer and employees.
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Health Insurance Alternatives: Best For Offering Low-Cost Coverage to Part-Time Employees and Contractors
In addition to the more traditional health insurance plans, you can cover your employees with health insurance alternatives such as Mira. As an employer, you can cover your employees with Mira for only $25/month for each employee. Mira members get access to low-cost preventive care, urgent care, lab tests, and prescriptions.
Below are some benefits to Mira:
- Low-cost: While traditional insurance plans can cost you around $5,400/year to cover each employee, Mira only costs $300/year with an annual membership. Unlike health insurance, your employees will not need to meet a deductible before using included services.
- Flexibility: You have many options in how you cover employees with a Mira membership. First, you can choose to offer the membership to employers and pay the monthly rate. Many employers also pay for all of their employee's medical expenses in addition to the monthly rate, which still typically ends up being cheaper than traditional insurance. Finally, you can couple Mira with a catastrophic health insurance plan to protect your employees in the case of an emergency.
- Cover more employees: With Mira, you can offer coverage to part-time employees and contractors. Since you can pay for Mira on a monthly basis, this is a great option to provide coverage for employees that may be working short-term as well.
Health Insurance for Employers Frequently Asked Questions (FAQs)
Am I required to provide health insurance for my employees?
Whether you have to provide health insurance to employees depends on how many employees you have. If you have over 50 full-time employees or the equivalent of part-time employees, you must either provide health insurance to 95% of employees or pay a fee. If you have fewer than 50 employees you are not required to provide health insurance to employees or pay a fee.
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What are the benefits of offering coverage to employees?
Even though you are not required to provide health insurance to employees if you are a small business, many employers decide to do so anyway. Below are some of the benefits of providing coverage to employees:
- Increase employee retention
- Greater employee satisfaction
- Healthy company culture
- Potentially lower monthly premiums
- Tax incentives
- Keep your employees healthy
How much does health insurance cost?
The cost of providing health insurance to employers depends on what type of plan you provide. If you get insurance through the small business health options program, you will have to pick what type of plan(s) you offer employees. These plans can include HMO, PPO, or POS plans. The figure below illustrates the annual premium costs for both the employer and employees covered by different types of group health insurance plans.
QSEHRA plans have a monthly maximum of about $441 for covering an individual and $891 for covering a family. The cost of self-funded plans varies greatly depending on the healthcare needs of employees, but Physician Care Health Plans outlined an example where this type of plan can cost employees around $632/month for each employee. A membership with Mira costs employers $25/month for each employee.
There are many different ways that you can offer health insurance to your employees as a business owner. Some coverage options include SHOP, self-funded plans, HRAs, and alternatives to health insurance. The plan that is best for you depends on how much coverage you would like to offer your employees, the number of employees you have, the amount of flexibility you would like, and how much you want to spend.