The coronavirus pandemic continues to impact the country's businesses and workers significantly. As a result, remote work and hybrid arrangements are gaining a stronger foothold, causing a massive shift in the economy and healthcare. Employers are still the most common source of health insurance in the U.S. (though just over 50%, according to Census reports), but this outdated model is rapidly losing its luster.
For small businesses, managing health insurance costs while providing valuable benefits to employees is a top priority. Exploring alternatives to traditional small-group health insurance can lead to more affordable, flexible solutions that better meet the diverse needs of both employers and employees. This guide highlights the best alternatives, including Health Savings Accounts (HSAs), Professional Employer Organizations (PEOs), telemedicine, and Association Health Plans (AHPs). Each option offers distinct advantages, from tax savings to improved access to care, providing small businesses with the tools they need to offer competitive health benefits efficiently.
In the rapidly changing healthcare environment, businesses increasingly seek ways to offer competitive benefits while managing costs effectively. While beneficial for many, the traditional group health insurance model may only align with some businesses' financial and operational goals, such as tiny to medium-sized enterprises (SMEs). The rising costs of employee insurance for employers serve as a pivotal reason for employers to consider health insurance alternatives. Here's an expanded look into why exploring these alternatives is becoming more critical:
One of the most compelling reasons for businesses to explore health insurance alternatives lies in the significant financial burden that traditional group health insurance plans can impose:
High Premiums: The cost of premiums for employer-sponsored health insurance has been steadily increasing. For many businesses, especially SMEs, these costs consume a substantial portion of their budget, limiting their ability to invest in critical areas such as employee development, infrastructure, and innovation.
Predictability of Expenses: Traditional health insurance plans often come with unpredictable rate increases at renewal times, making financial planning challenging for businesses. Alternatives can offer more predictable costs, helping companies to budget more effectively.
Administrative Complexity: Managing traditional health insurance plans requires significant administrative effort and resources, contributing to the indirect costs of providing health benefits. This complexity can be particularly burdensome for small businesses without large HR departments.
Exploring alternatives to traditional group health insurance can offer several financial benefits:
Beyond the financial implications, considering health insurance alternatives can also have strategic benefits:
By considering health insurance alternatives, businesses and individuals can find solutions that better match their needs, offering a balance between cost, quality of care, and flexibility.
Exploring health insurance alternatives offers a range of benefits that cater to the modern workforce and the evolving needs of companies. Here are key advantages to consider:
By incorporating health insurance alternatives, companies can offer more dynamic, adaptable, and cost-effective health benefits. This approach supports the business's financial health and contributes to a healthier, more satisfied workforce.
Traditional group health insurance has many drawbacks for business owners. It can be expensive, with pricey yearly renewals, and doesn’t offer the flexibility modern business owners need—the ability to work with a remote and mixed workforce. These obstacles send business owners looking for alternatives to group health insurance. So, what options are there besides the traditional group health insurance route?
While technically legal (if you have 50 or fewer full-time employees), we don’t advise this if you want to attract and keep good talent. There will always be another company that offers health benefits, so make sure you’re not missing out on great team members by choosing not to offer coverage.
This option lets you provide some health benefits, but your business has no tax advantage. Employees get a fixed, taxable stipend to purchase the individual health insurance plan of their choice and use it on out-of-pocket expenses, but your business has no tax advantage.
When you dig deeper into what this entails, it’s not as attractive as it sounds. When you increase employee salaries, you and your employees take a tax hit – more payroll taxes for you and more income taxes for them. So a portion of that extra cash goes to income taxes.
An HSA is a tax-advantaged savings account designed to be used with a high-deductible health plan (HDHP). It allows employees and employers to contribute pre-tax dollars, which can be used for qualified medical expenses. This setup provides a way to save on taxes and empowers employees to manage their healthcare spending more directly.
Partnering with a PEO allows small and medium-sized businesses to offer a broader range of health benefits by co-employing their staff with the PEO. This relationship enables businesses to access the PEO's larger pool, often more favorable health insurance rates, and administrative services for managing the plan.
Offering telemedicine as a health benefit is an increasingly popular option, especially with the rise of remote work. It provides employees convenient access to healthcare professionals via phone or video conferencing, often resulting in lower healthcare costs and increased accessibility.
AHPs allow small businesses to band together to purchase health insurance, leveraging their combined numbers to access better rates and more comprehensive coverage options, similar to larger corporations. This can be particularly advantageous for small businesses seeking to enhance their benefits package while managing costs.
A health reimbursement arrangement is an affordable, tax-advantaged alternative to traditional insurance, where employers reimburse their employees for individual insurance premiums and medical expenses (if applicable). HRA coverage is done on a pre-tax basis and is often considered the best health insurance for small business option.
Ask us about tax-free health insurance reimbursement!
→ Check out our 5 tips for choosing a small employer health insurance plan
→ Compare QSEHRA vs ICHRA to see what's best for you.
If you’re self-employed, you are the business owner, which means you’re responsible for getting your own health coverage and health benefits, and company group coverage isn’t an option.
So, what are health insurance alternatives for the self-employed?
Thanks to the Affordable Care Act (ACA), people who don’t have employer-sponsored health insurance plans can find affordable individual health coverage plans, like Blue Cross health insurance self-employed. Our individual health insurance platform can help you shop for the best plan.
(HCSMs) are cost-sharing membership groups available to people who share religion or ethical beliefs. Members pay monthly dues (like a premium) that cover medical costs for other members. These can be tricky since it’s not an insurance plan; they’re not required to pay out anything or follow (ACA) mandates. Read our CEO's review of Medi-share here.
is an affordable, tax-advantaged alternative to traditional insurance, where employers reimburse their employees for individual insurance premiums and medical expenses (if applicable) on a pre-tax basis.
Check out our new small business health insurance guide to dive deep into these ideas.
Bonus! You can reimburse employees who have both an individual and a Medicare plan. Through your HRA, you can reimburse Medicare premiums for Medicare-eligible employees. Read more about that process here and how Take Command can help you.
If none of the above health insurance alternatives for self-employed work for your specific situation, you may qualify for an even better option – an HRA for self-employed. This is a great affordable health insurance alternative for self-employed people. For a business owner to participate in an HRA, they must be considered an employee of the business and depends on how the plan and business are set up. These are some common ways companies are set up and what that means for HRA eligibility.
“As a self-employed individual, you are generally not eligible for an HRA because you are not an employee; your spouse can be an employee and eligible for an HRA and health plan that covers you.”
Please note: This strategy only works if you don’t hire any other W-2 employees that would be eligible for either ICHRA, QSEHRA or a One-Person 105 HRA (make sure to look at those rules closely) and assumes that you and your spouse don’t own any other businesses that have employees (common ownership rules would likely apply and the plan would fail to meet Section 105 requirements). And remember to keep good records!
We’re ready to chat on our site if you have specific questions about your business and how HRAs could help. Setting up an ICHRA is simple and quick, and our team is here to help if you need it. You should also check out this amazing guide to learn everything you need to know about individual coverage HRAs. And we have resources available to you specifically for small business owners so you can learn all about ICHRA; think of this as your ICHRA for dummies guide!
When is open enrollment for health insurance 2024? Open enrollment starts November 1 so hop over to our handy tool to help you navigate the healthcare marketplace, and check out our open enrollment resource guide.
As we enter open enrollment season and you're browsing the healthcare marketplace on healthcare.gov or considering health insurance alternatives, keep in mind that you have options regarding healthcare coverage.
Our team can help you decide what type of health insurance alternative is best for you and your business – whether it's a health care sharing ministry or health reimbursement arrangement – with our step-by-step tools and resources to help you find the best fit.
You can access many valuable resources, including FAQ pages for the ICHRA and QSEHRA and many informational posts on our blog. You can also chat with one of our team of experts anytime!