According to recent data from the Kaiser Family Foundation, the average cost of providing health benefits to a full time employee now tops $7,911 per year for single coverage, and $22,463 for family coverage.
That’s not sustainable for most small businesses.
Non-insurance alternatives like healthsharing are rapidly becoming the most popular way for very small businesses to get out of the crazy costs of traditional workplace insurance plans – while still providing employees with a robust health plan that helps them afford the health care they need.
In this blog, we will delve into what health sharing is, how it works, and the advantages it offers for small business owners and their employees.
Small Business Owners and Healthcare Options
In today’s market, small business owners have several options when it comes to health benefits for their work forces. These include:
- Offering a traditional health insurance plan
- Offering a lower-cost healthsharing plan to employees
- Combining healthsharing with a direct primary care plan
Self-insuring can work well for very large groups. But they are very risky and impractical for small employers, since they are costly to administer, and one large claim can destroy your cost projections for the entire year, and for multiple years at a time.
But traditional health insurance is increasingly impractical, as well, because of its high cost and the potential liability of administering a fiduciary ERISA-qualified health plan.
Choosing a healthsharing plan instead can substantially reduce cost and risk for small business owners, without sacrificing access to health care for your employees and their families.
What is Healthsharing for Small Business?
Health sharing – sometimes called “medical cost sharing” – is an alternative non-insurance approach to helping make health care affordable for individuals and families.
Healthsharing organizations are nonprofit associations of like-minded people who agree to live healthy lifestyles, and who agree to help share the medical expenses of other members.
These associations are often based on religious affiliation, but not always. Some top healthsharing organizations are completely secular.
In a health sharing arrangement, participants usually make monthly contributions to a collective fund, which is then used to pay for eligible medical expenses.
When a member incurs a covered medical cost, they submit a claim to the health sharing organization or community. The funds to cover the expenses are then distributed from the collective pool, facilitated by the organization that manages the health sharing program.
In some cases, members contribute to a special bank account. The healthsharing organization then facilitates the transfer of funds from many individual member accounts to the accounts of those in need, or to their medical care providers.
Health Sharing Saves Money
The number one reason why small businesses switch to healthsharing is cost savings.
On average, healthsharing programs save employers between 35% – 50% compared to monthly premiums for a traditional group health insurance policy.
By eliminating the administrative overhead and profit margins associated with traditional insurance, health sharing programs can offer more affordable monthly contributions.
Healthsharing Advantages for Small Businesses
No Limited Care Networks – Unlike health insurance, health sharing typically does not involve networks of healthcare providers or negotiated payment rates.
Participants in health sharing programs generally have more freedom to choose their own physicians and other providers than participants in workplace HMOs or “Obamacare”-type plans they purchase through their states’ health insurance exchanges.
Year-round enrollment – Healthsharing programs do not limit enrollment to open enrollment periods. Employees can enroll in a healthsharing plan at any time of the year.
Flexibility and Customization – One advantage of health sharing for small business owners is the flexibility to tailor plans to their specific needs. Unlike traditional insurance, there are no minimum contribution requirements or mandatory employee participation.
This allows small business owners to design a health sharing plan that aligns with their budget and the preferences of their workforce.
More alignment with your values – Because healthsharing plans are often religious organizations, you can choose healthsharing plans that align with your own values.
For example, many healthsharing organizations do not share costs related to elective abortion, gender reassignment surgeries, and other controversial procedures.
Healthsharing Disadvantages for Small Businesses
Sharing for pre-existing conditions is limited – Employers considering switching to healthsharing from traditional insurance should be aware of how healthshare plans treat pre-existing conditions.
While traditional health insurance covers pre-existing conditions right away, they also typically impose a waiting period before costs related to pre-existing conditions become fully shareable.
If you have employees with pre-existing conditions, or family members that may have pre-existing conditions, healthsharing may not be appropriate in these particular cases.
Many employers who establish group healthsharing programs also provide a mechanism to help these employees purchase traditional health insurance on their own in the individual market. In most cases, employees will qualify for an Affordable Care Act subsidy. However deductibles are typically much higher than they were in the group plan.
Healthsharing plans may also impose waiting periods for surgeries and cancer treatment, depending on the circumstances.
For these reasons, group healthsharing plans are usually more effective for relatively healthy workforce.
Limited Prescription Drug Benefits – Most healthsharing plans include only limited prescription drug benefits – mostly to drugs administered in the hospital or by a physician.
However, all HSA for America clients receive access to the HSA For America Rx discount program. Members can download their free printable membership card online, and then present their card to receive discounts of up to 80% on commonly-prescribed generic drugs.
It’s accepted at over 60,000 participating pharmacies nationwide. It even works for pet medications!
Members also qualify for significant discounts at thousands of other participating providers, too, including labs and imaging services.
Your participating employees will all qualify for this benefit no matter which of our healthsharing or health insurance options you choose. It’s good for all HSA for America clients.
Limited Mental Health and Drug/Alcohol Addiction Benefits – Healthsharing organizations typically require members to agree to live healthy and responsible lifestyles, and to abstain from drug abuse or excessive alcohol consumption.
Healthsharing plans also typically do not share costs related to illegal drug overdoses, addictions treatment, suicide and self harm, nor costs arising from injuries incurred in the consumption of a crime.
Most health sharing plans provide very limited sharing for costs related to inpatient mental health care, though some plans pay for some counseling and therapy costs.
It’s important your employees understand these limitations before dropping traditional health insurance for a healthsharing plan.
Compare Pricing on the Best Healthshare Plans Available
Healthsharing and Taxes
The costs of providing a healthsharing plan are generally tax deductible for employers as a compensation expense, just as health insurance premiums are.
However, the IRS considers employer healthsharing contributions to be a taxable benefit for employees. Some employers who switch to a healthsharing plan will ‘plus up’ employee pay to compensate for the higher taxes. In most cases, the savings from a healthsharing plan compared to a full-fledged traditional health insurance premium is worth it.
Healthsharing for Small Business Owners
Affordable and Comprehensive Cost Sharing Power
While every healthsharing programs is different, many of them still provide tremendous protection against even catastrophic medical costs, including long hospitalizations, surgeries, and cancer treatments – subject to limitations on pre-existing conditions as well as waiting periods for surgeries and cancer treatments for new members.
Most healthsharing programs also provide excellent maternity benefits, though some require the expectant mother to be married, and for the conception to have occurred after the membership effective date.
ACA Compliance and Additional Considerations
Smaller employers – those with fewer than 50 full-time equivalents, are not required under federal law to offer health insurance at all. But there is no penalty for small employers for not doing so.
Healthsharing is especially cost-effective for this market, since small employers who offer healthsharing in lieu of health insurance as an employee benefit face no Affordable Care Act penalty for doing so.
There is a penalty for larger employers who don’t provide an employer-subsidized ACA-compliant health insurance policy for employees. But many forward-thinking larger employers still offer a healthsharing plan rather than a traditional insurance plan.
This is because healthsharing saves so much money compared to health insurance premiums, they still come out ahead, even with the penalty.
Combining Direct Primary Care and Healthsharing for Small Business Employees
Direct Primary Care (DPC) is an arrangement in which plan members or their employers pay a flat, low monthly subscription to a primary care physician’s office. In return, plan members can see their doctor as often as they need to.
There are no additional deductibles, copays, or out-of-pocket costs.
This approach removes the complexities of insurance billing and allows physicians to spend more time with their patients, resulting in enhanced access, personalized care, and better health outcomes.
DPC plans aren’t designed to work by themselves. They only include routine services that can be done in the doctor’s office, such as checkups, medication maintenance and adjustment, prescription management, minor scrapes and sprains, sick notes, immunizations, and basic pediatric services.
Employees still need healthsharing or health insurance to address catastrophic medical needs, specialist care, ER visits, and other more complex medical needs.
Health sharing provides a means for employees to cover larger medical expenses, while Direct Primary Care focuses on comprehensive primary care services. This combination offers employees a more holistic and cost-effective healthcare experience, potentially reducing the need for costly insurance plans.
Health Sharing and Health Reimbursement Arrangements (HRAs)
In some cases, smaller employers can use an HRA, or Health Reimbursement Arrangement, in conjunction with healthsharing to help employees afford their medical expenses.
An HRA is an employer-funded benefit plan that helps employees cover their medical expenses. In an HRA, you as the employer aside a specific amount of money to reimburse employees for qualified medical expenses. Your contributions are tax deductible to your company.
The funds in the HRA can be used to pay for a variety of healthcare costs such as prescription medications and other expenses that the employees’ healthsharing or health insurance plan doesn’t cover, which they would otherwise have to pay out of pocket.
Employees submit receipts or documentation of eligible medical expenses. They are then reimbursed tax free by the HR.
The catch: Your employees may not use HRA benefits to pay monthly contribution costs to healthsharing plans.
QSERHAs and Healthsharing for Small Businesses
If you are considering establishing or migrating to a group healthsharing approach, you should choose to set up a Qualified Small Employer Health Reimbursement Arrangement, or QSEHRA.
To be eligible, you must have 50 or fewer full time equivalent employees. This is the only type of HRA that healthsharing participants can use. All other HRAs require employees to be covered under a health insurance policy that meets specific minimum essential coverage requirements, rather than a healthsharing plan.
By exploring options like the QSEHRA and understanding the nuances of healthcare sharing ministries, small business owners can provide valuable health benefits to their employees while considering the tax implications associated with different programs.
It’s essential to strike a balance between providing comprehensive coverage and ensuring compliance with applicable regulations and tax laws. This way, both the employer and employees can make informed decisions regarding their healthcare benefits and taxPersonal Benefits Manager. responsibilities.
Health sharing programs can be used in conjunction with Health Reimbursement Arrangements (HRAs) to enhance the benefits for small business employees. Employers can make tax-deductible contributions to HRAs, which employees can use for a variety of medical-related expenses.
The catch: Employees cannot use HRA benefits to pay for healthsharing contributions.
But your employees can use them to help cover other eligible healthcare expenses not covered by health sharing.
If an employee or family member has pre-existing conditions and a healthsharing plan would not be appropriate, they can use HRA benefits to purchase their own traditional health insurance plan on the open market.
This combination allows for greater customization and comprehensive coverage.
There’s no one-size-fits all solution. 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.
We’ll go over your employee census and help you provide the best mix of benefits for you – at an affordable cost compared to a traditional health insurance group policy.
Health sharing offers small business owners a viable solution for providing affordable and comprehensive health benefits to their employees.
By offering health sharing programs, employers can address the rising costs of traditional insurance while meeting the expectations of employees in today’s competitive labor market.
Through cost savings, flexibility, and customization, health sharing provides a valuable alternative that promotes employee well-being while still allowing small businesses to compete effectively.
Here are some additional blogs on this topic: The Most Effective Healthcare Strategies for Small Businesses With Less Than 50 Employees | How to Compare Health Sharing Program Benefits and Limitations: A Comprehensive Guide | How Businesses Can Save Money By Offering Health Sharing As an Employee Benefit | Affordable Group Health Insurance – A Guide for Small Businesses
Here are some additional pages related to this article: 2023 Complete Guide to Small Business Healthcare Plans | Health Sharing Plans for Small Businesses
Healthsharing for Small Business FAQs
What is health sharing, and how does it differ from traditional health insurance?
A health sharing plan is a form of healthcare financing where members contribute funds to a community pool to cover each other’s medical expenses. Unlike traditional health insurance, health sharing plans are often based on shared values or beliefs. They are operated by non-profit organizations rather than for-profit corporations. And they operate on a voluntary and community-driven model.
Can I, as an employer, offer a health sharing plan to my employees?
Yes, as an employer, you can offer a health sharing plan to your employees. Health sharing plans are a cost-effective alternative to traditional health insurance and can be an affordable and sustainable lower-cost option for both employers and employees.
Are health sharing plans a suitable alternative for all employees?
Health sharing plans may not be suitable for every employee, as eligibility requirements and coverage guidelines can vary. This is particularly important to understand when it comes to employees and their family members who may have pre-existing conditions.
It’s important to provide employees with detailed information about the plan and its specific features to help them make an informed decision.
Are health sharing plans regulated like traditional health insurance?
Health sharing plans are not subject to the same regulations as traditional health insurance. Healthsharing plans are not covered under ERISA, and employers don’t have the same obligations or potential liabilities as traditional health insurance plan sponsors who act as fiduciaries.
Can employees use health sharing plans for pre-existing conditions?
Health sharing plans may impose waiting periods for pre-existing conditions, meaning that coverage for those conditions may not be immediate. However, employees can generally sign up for a health sharing plan at any time during the year, providing flexibility for those with pre-existing conditions.
Can employees choose their healthcare providers with a health sharing plan?
Health sharing usually offers much more flexibility than traditional workplace health insurance plans when it comes to choosing healthcare providers. However, it’s important to review the plan’s guidelines to understand any restrictions or requirements regarding provider networks and eligibility for sharing expenses.
How do health sharing plans handle preventive care?
Many health sharing plans include coverage for preventive care, such as wellness visits, screenings, and vaccinations. However, the specific coverage and guidelines can vary between different health sharing organizations.
What are the potential cost savings for employees with a health sharing plan?
Health sharing plans can offer cost savings for employees and employers alike, as they typically involve lower monthly contributions compared to traditional health insurance premiums.
As an employer, you can divide the monthly contribution cost however you like: You can cover the entire cost for your employees, or just part of it. However, it’s important to weigh the cost savings against the specific coverage and limitations of each healthsharing plan to ensure it meets your employees’ health care needs.