Understanding Insurance Claims

Traditional Group Coverage Vs. Health Reimbursement Arrangement

If you own a small business, you know one of the secrets to retaining outstanding talent is offering the best benefits package you can afford. Business health insurance coverage is one of the main benefits most employees seek. But do you offer traditional group coverage or a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)? Your choice depends on several factors, including understanding what a QSEHRA is. Here is more information.

What Is a Qualified Small Employer Health Reimbursement Arrangement?

Group health insurance premiums can be costly, especially if your small business is already operating on a shoestring budget. These costs make it difficult for many small business owners to offer health care coverage to their employees. 

A Qualified Small Employer Health Reimbursement Arrangement is a way for you to help your employees pay for medical expenses. This reimbursement includes their monthly premiums for outside qualifying health insurance policies that would otherwise come out of their pockets. 

QSEHRAs are available to employers with less than 50 employees who do not offer traditional group health insurance. Through your QSEHRA, you can choose how much you will contribute tax-free to each full-time employee up to the limit established by the Internal Revenue Service.

In 2023, the employee's limit is $5,850 or $11,800 for a family. These amounts break down to $487.50 per month per employee or $983.33 per month per family. This amount increases annually based on inflation. 

Your employees would pay the expense and then submit a claim along with proof of payment to be reimbursed by the QSEHRA. If your employees do not submit a claim, the company does not automatically provide it. The business keeps the money. 

Would Traditional Group Coverage Be Better?

Traditional business health insurance coverage can be a real draw in recruitment. Most potential employees have had this type of plan with past employers and understand its benefits. 

There are four main components when purchasing traditional health insurance as a small business. These include the following.

Guaranteed coverage - When you purchase a small business health insurance plan, your insurer will generally guarantee coverage for you and your employees. Guaranteed coverage means insurance companies cannot turn you down for pre-existing conditions. Also, all eligible employees (and dependents) will be able to enroll regardless of health conditions.

The number of employees - To be eligible for group health insurance, most plans require you to have at least one full-time employee besides you as the owner. Some states and programs will allow you to count yourself as that employee. 

Cost - As the employer, you must pay at least 50% of the monthly premium for your employees. 

Coverage Period - Small businesses can enroll in group health insurance plans anytime during the year. Companies do not lock you into specific enrollment periods. Just know that most plans require you to enroll for a minimum of a year. 

Which plan is best for you and your small business? Only you can decide. 

For more info about business health insurance, contact a local company.