If the employee has a family, the total cost nearly triples: it costs $22,463 for a family coverage.
Yes, employees pick up part of the tab. About a third of it on average, depending on the employer.
But these massive premiums are still not sustainable for most small businesses.
Nor are they great for employees, who are often struggling to shoulder the monthly cost of health insurance themselves.
There has got to be a better way.
And it turns out there is: offering health sharing as an employee benefit.
This blog will discuss how small business owners and even independent contractors can opt out of the crazy health insurance cost spiral.
You’ll also learn how you can offer a more affordable, cost-effective solution that still provides a robust health benefit for employees – and saves thousands of dollars per worker in the process.
Surveying the Landscape: What Are Your Health Benefit Options?
Generally, small business owners who want to offer an employee health benefit have four basic options:
- Offer a Conventional Health Insurance Plan: This option is by far the most common. It’s also the most expensive. Additionally, maintaining a group traditional health insurance plan for employees carries a good deal of risk for employers. When you sponsor a group health insurance plan, you effectively take on the role of a fiduciary.That means you can potentially be sued for any number of causes related to your group health plan.And since the fiduciary standard is the highest and most exacting standard of care and good faith recognized under the law, plan sponsors have an uphill battle trying to defend themselves in court.
- Offer a Health Sharing Plan to Employees: Health sharing is a much more cost-effective alternative to traditional health insurance that’s rapidly gaining popularity. Monthly costs with health sharing plans are roughly half of those for a comparable traditional group health plan. However, health sharing may not work well for employees who have pre-existing conditions.
- Offer a Direct Primary Care Plan and Combine it With Health Sharing: This is a great hybrid approach that offers comprehensive coverage while improving your employees’ connection with their primary care provider.
- Self-insurance: Some employers opt to save premium dollars by keeping some or all of employees’ medical risk on their own books. This approach is impractical for smaller employers, however, since just one or two employees with health issues can throw your plan assumptions way off.
How Does Health Sharing Work?
In a health sharing program, individuals voluntarily join a like-minded community or association, often organized around shared values or beliefs.
Members commit to leading healthy lifestyles and pledge to support one another in times of medical need. This commitment extends to the financial aspect, as members collectively contribute to a central fund or pool.
Many health sharing organizations are faith-based. Some are focused on specific religious denominations. Others are non-denominational or even completely secular and open to everyone.
Contributions and Eligible Expenses
Members make regular monthly contributions to the health sharing organization, just as most people do with insurance premiums.
When a plan member incurs a medical expense that qualifies under the program’s guidelines, they submit a claim to the health sharing organization. These expenses could be doctor visits, hospital stays, surgeries, and even certain preventive services.
Cost Sharing Mechanics
Once a request is approved, the health sharing organization facilitates the transfer of funds to members who have medical needs that month.
The health sharing organization coordinates the distribution of funds either to the member or directly to the healthcare provider.
How is Health Sharing Different from Health Insurance?
Voluntary Participation: Health sharing is a voluntary arrangement based on shared values.
There’s never any requirement for employees to participate. There are no minimum participation numbers to hit when you offer health sharing as an employee benefit.
Underwriting and Exclusions: Unlike traditional health insurance plans, healthshare programs typically have waiting periods for pre-existing conditions.
That means that if a new enrollee has a pre-existing condition, the plan will limit sharing for expenses related to that pre-existing condition for a period of time.
Enrollment periods: Your workers can also sign up for a health sharing all year round. Health insurance companies only allow new enrollments when the employee is first eligible for the plan, and during open enrollment period thereafter.
Central Fund vs. Insurer: Health sharing relies on a central fund managed by the sharing organization, whereas group health insurance involves coverage provided by an insurance company.
Taxation: health insurance can be provided as a tax-free benefit. The contribution made by the business for health sharing memberships, while tax-deductible for the business, would be considered taxable to the employee.
Regulation: Group health insurance is subject to state regulations and to the Affordable Care Act.
Because health sharing is not insurance, these programs are not typically regulated under state Department of Insurance regulations, nor under the laws of the Affordable Care Acts.
Health Sharing Saves Money
Offering health sharing as an employee benefit can be a strategic move for small businesses looking to save money while providing valuable healthcare options to their employees. Here are some key ways in which health sharing benefits small businesses:
Health sharing plans typically come with substantially lower monthly contributions (akin to premiums in traditional insurance). Typically health sharing will be less than half the cost of health insurance.
This reduction in fixed costs can substantially alleviate the financial burden on small businesses, especially when compared to the often steep premiums associated with traditional group health insurance.
2. Flexibility in Contributions.
As with health insurance, health sharing programs allow employers to contribute to their employees’ monthly sharing contributions.
Small businesses can adjust these contributions based on their budgetary constraints and the level of support they wish to provide.
3. Reduced Administrative Overhead.
Unlike group health insurance, which involves complex administrative tasks such as claims processing and managing an insurance plan, health sharing arrangements are typically administered by the health sharing organization itself.
This means less administrative overhead for the employer, freeing up time, staff, and resources.
4. Tailored Benefits.
Small businesses can choose health sharing plans that align with the specific needs and preferences of their employees.
This flexibility ensures that employees receive benefits that are relevant to them, which can contribute to higher job satisfaction and retention rates.
5. Potential Tax Benefits.
Contributions made by employers toward their employees’ health sharing is tax-deductible, offering another avenue for cost savings.
However, it is important to note that any money contributed towards an employee’s healthshare membership will be considered as taxable income to the employee.
6. Shared Responsibility.
Health sharing encourages a sense of shared responsibility among participants.
When employees are invested in managing healthcare costs wisely, it can lead to better healthcare utilization and reduced overall expenses.
7. Exemption from Certain Regulations.
Health sharing programs, often structured around religious or nonprofit principles, may be exempt from certain insurance regulations.
This can lead to fewer compliance requirements and potential savings on regulatory costs.
8. Flexibility for Employees.
Health sharing allows employees the flexibility to choose healthcare providers without network restrictions, potentially leading to cost savings when they can access care that fits their budget.
9. Attracting and Retaining Talent.
Competition for quality employees is fierce.
Offering a cost-effective alternative healthcare solution like health sharing can make a small business more competitive in attracting and retaining talented employees.
This is the biggest reason small businesses are offering healthsharing.
No Narrow Provider Networks
At HSA for America, we are huge exponents of health care freedom.
We believe that granting Americans the freedom to choose their doctors and other providers will consistently lead to superior outcomes.
Unlike HMOs, which restrict their members to seeing a specific network of healthcare providers, most health sharing plans empower employees or plan members to see any doctor they choose.
This flexibility ensures that individuals can access the medical care they need from the providers they trust, even if they reside in sparsely populated areas or require specialized treatments.
Compare Pricing on the Best Insurance Plans Available
What Kinds of Employers Should Consider Health Sharing?
Health sharing as an employee benefit can be a viable option for a range of employers, but it may be particularly well-suited for certain types of organizations and situations. Employers who should consider offering health sharing as an employee benefit include:
Small and Medium-sized Businesses (SMBs).
Employers with fewer than 50 full-time equivalent employees are exempt from the employer mandate under the Affordable Care Act.
That means that employers have no legal requirement to provide health insurance at all. They pay no penalties for not offering an Affordable Care Act-qualified policy to employees.
That said, most small and medium-sized business owners know they need to offer some kind of health benefit to keep attracting quality talent.
Offering health sharing in lieu of a traditional group health insurance plan can fill that need – at just a fraction of the cost of a full-fledged group major medical plan.
Startups often need to carefully manage their financial resources.
Health sharing can offer a way to provide healthcare benefits to employees without the high costs typically associated with traditional group health insurance.
Faith-Based or Values-Driven Organizations
Health sharing programs often align with the values and beliefs of faith-based or values-driven organizations.
These employers may choose health sharing as it allows employees to share medical expenses within a like-minded community.
Many nonprofit organizations operate on tight budgets.
Health sharing can be a cost-effective way to provide essential benefits to employees while directing financial resources toward their mission.
Employers in States with Limited Insurance Options
In regions where insurance providers have limited offerings or where premiums are particularly high, health sharing can provide a more affordable alternative.
Employers Focused on Employee Well-being
Employers who prioritize employee well-being and value flexible healthcare options may find health sharing appealing.
These programs often emphasize a holistic approach to health, which can align with an employer’s wellness initiatives.
Any employer looking to reduce healthcare costs for both the organization and its employees may consider health sharing. Lower monthly contributions and the potential for employer contributions make it a cost-conscious choice.
Employers Seeking Administrative Simplicity
Health sharing programs are typically administered by the health sharing organization itself, simplifying administrative tasks for employers. This can be attractive for organizations with limited HR resources.
Employers in Need of Customization
Health sharing allows for customization of benefits based on the needs of the workforce. Employers can tailor plans to suit their employees’ preferences and requirements.
Health Sharing Disadvantages
- Waiting Periods for Pre-Existing Conditions. Health sharing may not work well where there are employees and/or dependents who have significant preexisting conditions. That’s because health sharing plans generally won’t share expenses related to those pre-existing conditions for several years after the member enrolls in the plan.
- Lack of prescription drug insurance coverage. Health sharing plans typically do not provide direct prescription drug insurance coverage. However, health sharing plans typically provide access to excellent drug discount plans that provide extremely low pricing for hundreds of commonly prescribed drugs.These plans work particularly well for generic drugs; brand name drugs may not be included in your plan.
- Maternity plans may not cover unmarried women. Many Christian health share ministry organizations choose not to subsidize certain kinds of behaviors. While health sharing plans typically do provide excellent cost sharing benefits for maternity, childbirth, and neonatal care, some health sharing plans limit their maternity and childbirth-related cost sharing to women who are married or widowed.Some also may only share costs to pregnancies beginning after the plan effective date, or where the child’s due date is at least 1 year from the member’s effective membership date.Consult your health sharing plan’s membership guidelines for full details.
- Limited Mental Health and Drug/Alcohol Addiction Benefits. Health sharing plans typically provide less extensive benefits for mental health, alcoholism treatment, and drug addictions treatment compared to traditional health insurance plans. Health share plans also typically don’t share costs arising from suicide attempts, self-harm, or for injuries arising from drunk driving incidents.
Compare Pricing on the Best Healthshare Plans Available
Taxation of Health Sharing Plans for Small Businesses
Health share plans don’t enjoy the same tax subsidies that traditional workplace health insurance plans get.
In the workplace context, when an employee pays some or all of their employees’ health share contributions, those contributions are deductible for the employer as a compensation expense – just as they are with traditional health insurance plans.
However, unlike traditional health insurance premiums, employee costs are not tax deductible to the employee.
Many employers find that health sharing still makes sense, however, even without the employee tax deduction.
This is because overall monthly costs for health sharing plans are so much lower than they are for traditional insurance that employers can shoulder more of the cost, so employees pay little or nothing.
Another approach is for employers to “plus up” employee wages to account for the income taxes and the amount of the health sharing plan contributions. Because the employer is saving so much money by dropping traditional group health insurance in favor of health sharing.
Can My Employees Still Use HSAs If I Switch to Health Sharing?
Employees who are themselves business owners or who have verifiable income from self-employment, or who have spouses who do, have an excellent option in the HSA SECURE health sharing plan.
If you have employees who are not business owners and who don’t have verifiable income from self-employment, we now have an innovative new solution for them: The 1Complete Solution health sharing plan.
Until recently, it wasn’t possible for statutory employees to use health sharing plans instead of traditional health insurance unless they themselves were business owners or had verifiable self-employment income.
However, thanks to some innovative product design, it is now possible for employers to help employees combine health sharing with the tax savings and power of health savings accounts.
And it works for employers, too: Dollars that you or your employee contributes to their health savings account are not subject to payroll taxes.
Direct Primary Care – A Great Match for Health Sharing as an Employee Benefit
How DPC Works
Direct primary care, or DPC, is a membership/subscription-based model for primary care and family doctor services.
It functions like a fitness club membership: The member (or their employer!) pays an affordable, predictable flat subscription rate per month.
In exchange, the member receives as many appointments with their primary care doctor as they need.
There are no additional deductibles, coinsurance, or co-pays.
DPC doctors typically don’t even take insurance. When they take insurance, they need to spend too much time on documenting everything for the insurance company, which takes away time needed for patient care.
Insurance also requires small practices to hire teams of billing specialists to do nothing all day long but send paperwork back and forth to insurance companies in the effort to get paid. This adds a massive amount of overhead to the practice. The cost ultimately gets passed on to the patient.
By dropping the insurance company and contracting directly with the patient (or in a group setting, the patient’s employer) the DPC physician is able to cut these overhead costs by a huge margin. They can then take on a much smaller patient load.
As a result, they can spend much more time with each patient. This leads to a much closer doctor-patient relationship. And much higher patient satisfaction ratings as a result.
By combining DPC for routine and preventive care with health sharing for larger medical expenses, individuals and employers can create a comprehensive and cost-effective healthcare strategy that meets their needs while controlling costs.
This approach prioritizes wellness and financial security, offering a balanced healthcare solution.
- Cost Savings. Combining DPC with health sharing can lead to cost savings for both individuals and employers. DPC reduces the need for expensive specialist visits and ER trips, while health sharing can cover substantial medical expenses that might otherwise be financially crippling.
- Comprehensive Coverage. Together, DPC and health sharing provide a well-rounded healthcare solution. DPC covers day-to-day medical needs, while health sharing offers financial protection for more serious health events.
- Elimination of Redundancy. Of course it is possible to combine direct primary care with a traditional health insurance plan. The problem with this approach is two-fold:First, you wind up overpaying for traditional health insurance vs. a health sharing plan.Second, you wind up having to pay twice for primary care services: Once for the coverage that has to be priced in to the traditional health insurance plan, and again for your direct primary care membership. Combining DPC with a health sharing plan prevents this redundancy… and saves you money.
- Choice and Flexibility. DPC allows patients to choose their primary care providers, fostering a trusting and ongoing relationship. Health sharing often provides flexibility in choosing healthcare facilities and providers, ensuring members have options for specialized care.
- Transparency. Both DPC and health sharing programs often emphasize transparency in healthcare costs, empowering individuals to make informed decisions about their care.
For employers looking to combine direct primary care with a health sharing plan, the DPC DIRECT health sharing plan is a good option. This particular plan is designed specifically to dovetail with direct primary care.
That means the plan is more likely to provide a seamless transition between their primary care doctors and specialists, hospitals, ERs, urgent care clinics and other forms of non-primary care.
This minimizes the chances of surprise billing from services who fall in the “cracks” that sometimes exist between the two types of plans.
Get Help With Plan and Benefits Design
There is no one-size fits all solution for small business employee benefits. Every situation is different. The best solution for your business will depend on a combination of factors, including:
- Your available budget and consistency of business cash flow
- The age and health status of your workers and their family members
- The number of employees and how many of them are part-time or full-time
- Your workers’ wages or compensation levels
For expert help designing a custom plan that offers a combination of benefits suitable for your specific work force and situation, contact a Personal Benefits Manager.
Here are some additional articles on healthsharing programs: When Is the Health Insurance Deadline For 2024 Plans? | How to Combine a DPC Membership with a Health Sharing Plan
Mike Montes is a Personal Benefits Manager at HSA for America. His aim is to help you make smart and informed healthcare coverage decisions that will fit your needs and budget. Read more about Mike on his Bio page.