With all of the tax hubbub lately small business owners and their advisors have had a tough time keeping up with all of the changes. Small business health plans have evolved through a rapid succession of changes over the past year and a half. Yet relatively few employers have taken the time to sort through the changes to look for opportunities for savings and improvement. In the last 14 months we’ve had two major tax laws affecting small business health plans, two executive orders, one revenue procedure and lots of changes in the insurance marketplace. This blog post is meant as a broad overview of the topic in six bullet points.
- Today’s employee health benefits are delivered through a combination of insured and uninsured plans. The key to maximizing value is to find the best mix of these two.
- No matter what the plan, the goal is the same: to deliver the most health benefits at the lowest cost, with the least amount of administrative hassle, tax-deductible for the employer and tax-free to the employees.
- Qualified insurance plans are fewer and more expensive but less expensive non-qualified or “skinny” plans are expanding. Interstate association plans per the President’s executive action are not available yet.
- The most efficient small business health plan is likely to involve some sort of Health Reimbursement Arrangement (HRA). This design offers the lowest cost and the highest percentage of employer contributions directed directly to medical benefits.
- There are now three different types of HRAs available to small businesses, each with its own set of rules and applicability. Those are: 1) Qualified Small Employer HRAs (the most complex), 2) Traditional HRAs (only for employers with group health insurance) and 3) Exempt, special purpose or supplemental HRAs (the easiest and most flexible.
- An employer can use two (but not all three) types of these health plans into the plan that best fits the situation.
There has never been a time in the past when more options were available but finding those best-suited opportunities generally takes some effort in combination with an experienced health benefits professional. Every small business health plan should be individually reviewed for savings and improvement possibilities. I am happy to schedule a review in person or through a remote consultation.
This bog post is part of the ongoing development of a new program “Trends and planning opportunities in small business health plans”. I would be pleased to share more information.