Modern Benefits for Healthier Teams & Stronger Businesses
For small business owners, designing a competitive benefits package is one of the most impactful ways to attract and retain top talent. But skyrocketing healthcare costs and seemingly endless plan structures make selecting a strategy increasingly complex. Employers must look beyond premium price tags and understand how risk, administration, and coverage mechanics alter the true cost of care. How do we know which employee benefit plan is best for our employees? This guide breaks down the top employee health insurance strategies available to small businesses today, evaluating standard group plans, level-funded options, and High-Deductible Health Plans (HDHPs) to help you navigate your options.
Fully Funded Insurance: When you pay the insurance company to “own” your risk. The insurance company analyzes the risk and sets a premium amount they expect to cover claims, admin, and some profit.
Level Funded Small Employer Plans offer greater savings potential to employers, while still limiting the risk of catastrophic claims. To understand how a level funded plan works, we’ll cover a couple definitions.
Self-Funded Insurance: When a company completely “owns” their own risk. This means the employer pays all claims out of a pool of funds they set aside. Some of those funds may come from employee payroll deductions.
Stop Loss Insurance: This is a type of insurance plan that sits on top of another plan that only covers losses above a certain threshold (an attachment point). Stop loss policies have specific and aggregate attachment points.
A level funded small group plan is a hybrid of fully funded and self funded. It packages the benefits of self funding, such as potential savings and claims visibility, with the predictability and administration support of fully funded plans. Employers who have the risk tolerance and financial ability to explore level funded plans can implement strategies to lower claims costs and potentially receive a refund of a portion of their unused premiums.
Individual Cover Health Reimbursement Arrangements are another option for small business owners to help employees pay for health insurance. HRAs can be set up and structured in a number of different ways. Here we will focus on setting up an HRA for an employee to use the funds to purchase individual health insurance.
A couple important points to know about ICHRAS.
- Formal structure matters so the funds are not treated as income to the employees by the IRS. This also protects the employer from incurring fees and penalties for Employer Payment Plans violations.
- ICHRAs are technically a self-funded health plan, and IRS filing requirements and PCORI fees apply.
- Partnering with a broker that understands both group and individual health plans will get you and your employees the best outcomes.
- An ICHRA can be used to satisfy the Employer Responsibility Provision of the Affordable Care Act for employers with more than 50 full time employees.
Health Savings Account contributions are another way you can help your employees pay for healthcare costs. There are a lot of benefits to Health Savings Accounts and they can be a great addition to your employees’ financial well-being.
Only eligible individuals can contribute to a Health Savings Account. If an employer contributed to an ineligible person’s account, it could result in penalties to both the employer and the employee, so understanding these rules is imperative. Here is an overview of important factors:
- To contribute to an HSA, an individual must be enrolled in a qualified high deductible health plan. This includes if someone, or a company, is contributing on their behalf.
- An individual contributing to an HSA, or being given contributions can not be covered by any other disqualifying coverage, such as a PPO plan, Medicare, Veterans Administration Healthcare etc.
- This type of arrangement would fall under a section 125 plan under IRS guidance; plan documents need to be created and non-discrimination testing needs to be completed annually.
Disclaimer
Beyond Health employs licensed insurance producers authorized to sell life and health insurance in Utah, Idaho, Wyoming, Colorado, Montana, and South Carolina. Our activities comply with state licensing requirements and partner carrier guidelines.
Product availability and enrollment options may vary by state. For more information or questions, please contact us directly.