With years of double-digit rate hikes pumping up the cost of providing employees with group health insurance coverage, a solution is long overdue. More and more small businesses are struggling to move employee health benefits out of the red. The other side of the equation is how to attract the talent needed to make your business out-perform competition, so dropping benefits completely also comes with long-term consequences.
One solution that I’ve seen small business owners use successfully again and again is to move out of the group plan market. Instead of group health insurance, your business can help employees obtain coverage through the individual health insurance market at a much lower cost. There is one caveat: pre-existing health conditions are not guaranteed to be covered in the individual market until 2014.
An HRA is a means to reimburse whatever employee medical expenses you choose to cover, including the cost for their individual health insurance. The flexibility of HRAs makes them suitable for various types of businesses. Flexibility is also advantageous for employees with divergent health care wants and needs. We’re seeing a great interest in alternative therapies as appreciation grows for the positive patient outcomes produced.
And, since employees are reimbursed, there’s little upfront funding required with an HRA. Of course, you can combine an HRA with Health Savings Accounts. These offer employees more incentive to save for retirement costs, while keeping funds available to cover routine out-of-pocket health care costs. You can find the details of how both options work here on our website.
The simplicity of an HRA keeps administrative costs down, too. A third party will review and approve employee requests for reimbursement to maintain impartiality, and tax-free reimbursements can go paperless with direct deposit or go through another payroll system. Overall, the HRA and the HSA are helping small businesses remain competitive. They incorporate tax advantages and flexibility that make both the employer and the employee happy.