Nonprofits face unique challenges providing health benefits that require innovative solutions to balance value and financial sustainability. We explore health coverage for nonprofits, including the advantages of HRAs like ICHRAs and QSEHRAs, addressing pain points of low budgets and salaries. Discover how HRAs can balance mission-driven impact and employee well-being when it comes to health insurance for nonprofits.
Finding health insurance for nonprofit employees
According to a recent study conducted by the Urban Institute, approximately 20% of nonprofit workers in the United States lack access to employer-sponsored health insurance. This highlights the importance of exploring innovative solutions that can help bridge this gap and support the well-being of nonprofit employees.
One such solution gaining traction is Health Reimbursement Arrangements (HRAs). HRAs offer flexibility and cost control, allowing nonprofits to allocate their limited resources efficiently while attracting and retaining top talent.
In a report published by the Society for Human Resource Management (SHRM), it was found that nonprofits with comprehensive employee benefits, including health coverage, experience higher employee satisfaction and increased productivity.
This demonstrates the importance of investing in employee well-being and the positive impact it can have on nonprofit mission success.
HRAs offer nonprofits a strategic tool to deliver valuable health coverage, overcome budgetary constraints, and attract and retain talented individuals dedicated to advancing their mission.
Exploring Health Reimbursement Arrangements (HRAs) for nonprofits
Health benefits are a key factor in recruiting and retaining top-tier talent in any organization, including nonprofits. But traditional health insurance plans may not always be the most cost-effective or flexible solution for these organizations. HRAs are a unique tool that could potentially transform the way nonprofits approach health benefits.
There's a reason that nonprofits comprise roughly 15% of our small business clients on our HRA administration platform.
What are HRAs?
HRAs provide a means for employers, including nonprofits, to assist their employees in paying for healthcare costs by reimbursing them for out-of-pocket medical expenses and premiums for individual health insurance policies. Unlike traditional health insurance plans, HRAs are employer-funded health benefit plans that offer flexible, customized benefits for employees. Another perk? They are not subject to payroll tax, employer tax, or income tax.
There are a few different kinds. Let's go over those next.
Qualified Small Employer HRA (QSEHRA)
Made specifically for companies with less than 50 employees, small non-profits should consider a QSEHRA to manage the health benefits of their small teams. QSEHRAs can be used to reimburse premiums and medical expenses for benefits for non profit employees. While they have annual reimbursement limits, QSEHRAs work well when non profit employees are getting coverage from spousal plans or are using a sharing ministry. They are more flexible than these next two options when considering health insurance for non profit employees.
Individual Coverage HRA (ICHRA)
ICHRAs are another option for not for profit health insurance. They are available for companies of any size and are not subject to annual limits. They different further from QSEHRAs because they allow employees to be grouped into classes to determine the varying reimbursement rates. For example, part time employees could be offered one amount, and salaried workers could be offered another.
Integrated HRA
Another option for an HRA for health insurance for non profit employees is an integrated HRA. It's a traditional HRA that's been around for a while. It's supplemental to a group health insurance plan and is for medical expenses only (no premium reimbursement).
The Advantages of HRAs for Nonprofits
HRAs serve as a robust solution for nonprofits navigating the complex landscape of health benefits.
Budget Friendly Benefits
One of the biggest hurdles nonprofits face is the unpredictability of healthcare costs. HRAs provide a solution to this problem by enabling nonprofits to set a fixed amount for each employee's HRA account annually. Nonprofits can accurately and efficiently budget their healthcare expenses without sacrificing the quality of benefits offered to employees.
Flexibility
Nonprofits using HRAs offer flexibility in designing a health benefit plan that aligns with the nonprofit's resources and the specific needs of their employees, including reimbursement for a wide range of medical expenses, such as doctor visits, prescription drugs, and even health insurance premiums.
Tax Advantages
HRAs provide tax advantages for both the nonprofit and its employees. The reimbursements are typically tax-deductible for the nonprofit, reducing their tax liability, while employees receive tax-free reimbursements, increasing the value of their health benefits. This tax efficiency creates a win-win scenario for both parties.
Easy and Fast
HRA Administration does the heavy lifting for nonprofits looking to provide not for profit health insurance to their teams. Set up is quick, onboarding is hands-on and personalized, and reporting is automatic.
What's more, many small non profits that lack an HR department benefit from being able to effectively outsource their benefits and the administrative burden that comes along with that.
HRA Alternatives
HRAs are a great fit in certain situations, but they certainly aren't for everyone. Luckily, there are other options for nonprofit employee health insurance to consider. These include:
- Traditional group health plans
- Sharing ministries
- HSAs (health savings accounts)
- Doing nothing. Yes, you read that right. If you don't have 50 full time equivalent employees, you don't technically have to offer health insurance.
Comparing HRAs vs Alternatives
To make the right choice for health benefits, nonprofits must understand the advantages and limitations of various options.
Traditional Group Health Plans for Nonprofits
When asked about employer sponsored health insurance, most people envision the model of traditional group health insurance (sometimes referred to as “fully funded”).
That’s because it’s the model of insurance with which most people have experience. While it is the standard-bearer of employer-sponsored benefits, group health insurance remains difficult to understand both for employers and employees alike. It certainly has it's pros and cons, but high costs and inflexible, one-size-fits-all designs are at the top of the list.
Advantages of HRAs over Traditional Group Health Plans
- Cost Control: HRAs allow nonprofits to control costs by setting a fixed contribution amount. Traditional group health plans often come with higher premiums, making HRAs a cost-effective alternative.
- Flexibility: HRAs offer more flexibility in benefit design, allowing nonprofits to tailor reimbursement amounts and eligible expenses to better meet the unique needs of their employees.
- Tax Efficiency: HRAs provide tax advantages for both nonprofits and employees, with reimbursements typically being tax-deductible for the organization and tax-free for employees.
Possible Advantages of Traditional Group Health Plans over HRAs
- Simplicity: Traditional group health plans can be simpler to administer since they involve a single plan with standardized coverage for all employees. If there's part time or remote employees as part of your nonprofit, this would not be the case.
- Comprehensive Coverage: Group health plans often offer broader coverage, including services such as dental, vision, and mental health, which may be more extensive than what HRAs alone can provide.
- Employee Perception: Some employees may perceive traditional group health plans as offering more comprehensive and secure coverage, potentially contributing to higher employee satisfaction.
Understanding the specific needs, resources, and preferences of your nonprofit is essential in selecting the most beneficial health benefits plan, whether it be an HRA or a traditional group health plan. Evaluating the advantages and potential limitations of each option can guide nonprofits in finding the right fit for their unique circumstances.
Sharing Ministries
When it comes to health benefits for nonprofits, there are various options to consider. Let's compare Health Reimbursement Arrangements (HRAs), including ICHRAs and QSEHRAs, with Sharing Ministries to help nonprofits make informed decisions.
Advantages of HRAs over Sharing Ministries
Budget Control: HRAs allow nonprofits to have control over their healthcare costs by setting a fixed contribution amount. In contrast, Sharing Ministries require members to contribute a monthly share, which may vary based on factors such as family size and medical history.
Tailored design: HRAs offer more flexibility in benefit design. Nonprofits can tailor reimbursement amounts and eligible expenses to better meet the unique needs of their employees. Sharing Ministries often have specific guidelines on what expenses are eligible for sharing, which may limit flexibility.
Tax Advantaged: HRAs provide tax advantages for both nonprofits and employees. Nonprofits can typically deduct their HRA contributions from their taxes, reducing their overall tax liability. Employees receive HRA reimbursements tax-free, maximizing the value of their health benefits. Sharing Ministries, on the other hand, are not subject to the same tax advantages.
Possible Advantages of Sharing Ministries over HRAs for nonprofits
- Simplicity: Sharing Ministries can be simpler to participate in and administer. Nonprofits do not have to manage the complexities of setting up and administering an HRA. Sharing Ministries often have a straightforward application process and require members to submit medical bills for sharing.
- Community and Support: Sharing Ministries foster a sense of community among members who share common beliefs. Members often support one another through prayer, encouragement, and financial assistance. This aspect of community can be appealing to employees who value a shared faith-based connection.
- Coverage Scope: Sharing Ministries may offer broader coverage for certain types of medical expenses, including alternative and holistic treatments that might not be covered under traditional health insurance or HRAs.
Evaluating the advantages and limitations of each option guides nonprofits in finding the right health benefits plan based on their unique circumstances and employee needs.
HSAs
Health Savings Accounts (HSAs) are another way to help nonprofit employees with health insurance costs and medical expenses. These have to be offered alongside a HDHP (high deductible health plan) as part of a traditional group health insurance offering. Funds in an HSA are owned by the employee and roll over. It's not "use it or lose it." What's more, funds invested can grow, making them a helpful financial tool for employees. Some employers will match contributions.
How to Choose the Right Health Benefits Plan for Your Nonprofit
When it comes to selecting the best health benefits plan for your nonprofit, several factors should be taken into consideration. By carefully evaluating these factors, you can make an informed decision that aligns with your organization's size, financial capacity, and the specific needs of your employees.
Factors to Consider
When making a benefits decision for your nonprofit, here's what to keep in mind.
- Size of Organization: When it comes to choosing the right health benefits plan for your nonprofit, the size of your organization matters. Smaller nonprofits may find traditional group health plans to be more manageable, while larger organizations can benefit from the flexibility that HRAs, like ICHRAs or QSEHRAs, have to offer.
- Financial Capacity: HRAs offer cost control for nonprofits with limited financial capacity, while traditional group health plans provide comprehensive coverage but may require a larger financial investment. Assessing financial resources is crucial in choosing the right plan.
- Specific Needs of Employees: Consider employee demographics, healthcare needs, and preference for choice and flexibility to determine the best fit between HRAs and traditional group health plans.
Guidelines for Choosing the Most Suitable Plan
Choosing the right benefits package for your nonprofit are big decision! Here are a few action items for you to help you make the smartest choice.
- Evaluate Cost and Budget: Carefully analyze the costs associated with each health benefits plan, including premiums, contributions, and potential out-of-pocket expenses for both the nonprofit and employees. Consider the long-term financial sustainability and alignment with your nonprofit's mission.
- Assess Employee Preferences: Survey your employees to understand their preferences and needs regarding healthcare coverage. Consider their desire for choice, flexibility, and the value they place on comprehensive coverage versus cost-sharing.
- Seek Expert Guidance: Consult with benefits advisors, insurance brokers, or HR professionals who specialize in nonprofit health benefits. Their expertise can provide valuable insights and help navigate the complexities of different plan options.
- Consider Compliance and Administration: Assess administrative requirements and compliance responsibilities for each plan and consider partnering with Take Command for streamlined support.
Are Nonprofits Required to Offer health insurance?
Do nonprofits have to offer health insurance? Nonprofits are not federally required to provide health insurance, but state laws and regulations may vary, so compliance should be ensured through local regulations. Nonprofits over 50 are typically exempt from the Employer Mandate set forth by the Affordable Care Act.
Exemptions for Nonprofits
Nonprofits, including religiously affiliated ones, may qualify for exemptions from certain contraceptive coverage requirements. It's crucial to understand legal obligations and exemptions that may apply to specific circumstances.
Tax Credits for Nonprofits
Nonprofits may not have access to the same tax credit programs as for-profit businesses, but there are still tax incentives and credits available to help alleviate the costs of employee benefits. The Small Business Health Care Tax Credit is just one example of a credit that eligible small employers, including nonprofits, can take advantage of when providing health insurance coverage to their employees.
Here are a few things to keep in mind:
- Nonprofits should seek guidance from tax professionals or benefits advisors to explore potential tax credits and incentives that are specific to their organization.
- It's crucial for nonprofits to navigate the legal landscape carefully, understand the requirements and exemptions related to employee benefits, and consult with experts who specialize in nonprofit organizations.
- Exploring tax credits and incentives can help nonprofits manage the expenses associated with providing employee benefits, further supporting their financial sustainability and mission-driven objectives.
Guiding Nonprofits towards the Right Health Benefits Plan with Take Command
HRAs, including ICHRAs and QSEHRAs, offer cost control, flexibility, and tax efficiency for nonprofits. ICHRAs provide customization and scalability, while QSEHRAs are suitable for smaller organizations seeking simplicity. Nonprofits should evaluate their unique needs and circumstances, such as organization size, financial capacity, and employee preferences, when selecting a health benefits plan. Seeking guidance from experts and trusted partners like Take Command can help nonprofits make informed decisions.
Take Command offers comprehensive services to help nonprofits navigate the complexities of HRAs, ensuring compliance, simplifying administration, and providing personalized guidance.
With our expertise, nonprofits can maximize the benefits of HRAs while mitigating potential drawbacks, enabling them to offer competitive health benefits that contribute to the overall success of their mission. Our experienced and friendly team is ready to help you on your health benefits journey.
