When it comes to employer-sponsored health insurance, a strategic decision has to be made regarding the amount each party should contribute. There’s a minimum percentage you must contribute toward a traditional plan as an employer in the U.S. Your employees will bear the remaining cost, primarily through a payroll deduction. Keep reading to see what percentage of health insurance U.S. employers are paying and the best strategies to share this cost with your employees.
Percentage of Single-Coverage Health Insurance Covered by Companies
Single coverage health plans cost about $7,470 a year, with employers covering 83% of it ($6,200). Employees contribute about 17% of the total premium or $1,270 annually. Each year, companies pay approximately $15,579 (73%) toward the $21,342 family health plan premiums. Workers cover about 27% of the cost ($5,763).
Less Contribution of Small Businesses Toward Family Plans
For 27% of covered employees in small firms, the employer funds 100% of single coverage premiums, compared to just 4% of covered employees in large corporations. As for family coverage in small companies, 28% of covered workers contribute more than 50% of the premiums, compared to just 4% in large companies.
Do All Firms Offer Health Benefits?
Due to budgetary constraints, just 48% of small businesses with three to nine employees provide health insurance. This is in sharp contrast to nearly all corporations with 1,000 or more workers with employer-sponsored coverage. Premiums for family coverage have soared 55% over the past 10 years and 22% in the last five years. The rising cost can explain why firms with few employees don’t invest in this coverage.
Health Reimbursement Arrangement as an Alternative to Group Health Insurance
With a health reimbursement arrangement (HRA), employees individually purchase their own coverage. Then, their employer pays them an allowance to offset the cost. This alternative strategy is more affordable to small firms as employers can decide their share of the cost.
How HRAs Work?
- You set the allowance (the maximum amount you’re willing to reimburse an employee for medical expenses)
- Employee purchases an individual health insurance policy
- Employee provides proof of healthcare expenditure (receipts, invoices, etc.)
- Employer reviews documentation for healthcare expenses incurred, usually with the help of an HRA administrator
What is Qualified Small Employer HRA (QSEHRA)?
A qualified small employer HRA is a more affordable alternative to group health insurance. It’s ideal for organizations with fewer than 50 full-time workers. With this plan, you refund your employees tax-free their healthcare expenses, including individual health plan costs, up to a specified limit.
What is Individual Coverage HRA (ICHRA)?
If you’re looking for an alternative contribution strategy for any company size and with no contribution limits, consider the individual coverage HRA. This option lets you refund your employees tax-free, their medical expenses and health insurance premiums. You can choose a standalone ICHRA or have it as a part of the company’s health benefits program along with the standard group health insurance.
Contact Us for Affordable Employer-Sponsored Health Insurance
Availability of health insurance is still a key benefit that most employees consider when evaluating their employment options. While most small businesses can’t afford standard group or individual health insurance plans for employees, they can try alternative strategies like HRAs. If you want to explore affordable health insurance options for small firms, contact us today at Kneller Insurance Agency to learn more!
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