The data is clear, employees want health benefits. But for small businesses, finding an affordable and suitable health plan can be a real headache. It's easy to get overwhelmed with options, prices, and paperwork.
But there's another way: it's called ICHRA, which is a long and complicated acronym for individual health reimbursement arrangement. ICHRA plans work like a pre-tax, fixed health benefit allowance. Employers give their team pre-tax money to use for health insurance that employees buy (and own) from the marketplace.
No more dealing with long sales processes or worrying about participation rates and enrollment. Plus, it gives employers more control over their budget and lets the employees choose what health plan works best for them. But here's the big question StretchDollar gets frequently: Can employees find a good plan on the marketplace?
The answer is yes. We'll reveal three marketplace health insurance secrets that most small business owners don't know, and how a pre-tax fixed benefit can make employee health coverage affordable.
Secret #1: Health plans on the marketplace are often cheaper than group plans.
One of the most common myths around small group health insurance is that business owners are getting a good deal. For many years it was true, small business owners were offered "discounted" group health plans that made it cheaper and more accessible for their employees to have health insurance coverage (than if they tried to purchase a plan on their own.)
But that trend has changed. Today, in more than 20 major cities across the US, small group health plans are more expensive than a comparable health plan purchased through the individual health exchange. This means that small businesses that opt for group plans often end up paying more, making it a more expensive option.
The good news is that employers can save money by using a pre-tax, fixed benefit (also known as ICHRA) to help their employees purchase a health plan that fits their needs on the individual marketplace. The even better news is that they can also control their budget by selecting the amount they can afford (versus the minimum premium payment they must pay.)
Secret #2: The marketplace has a more diverse selection of plans.
The Affordable Care Act (ACA), also known as ObamaCare, was passed into law in the United States on March 23, 2010. This landmark health reform legislation was put in place with the intent to expand access to affordable health coverage among other reasons. While the uninsured rate did improve tremendously, generally, the health plan options were limited and the lack of selection was a big criticism that hung over the marketplace for years.
But in recent years, the federal and state-based exchanges have grown in diversity while the small group space has, well, shrunk. Even big players like Humana have left the private group space entirely. The health insurance options available on the marketplace are now more diverse and offer a wider range of coverage than what was previously available or, more importantly, than what you might find in the small group space.
Secret #3: The marketplace has some pricing safeguards built in.
The only thing more frustrating for small business owners than the overall cost of employee health insurance, is the constant and unpredictable increases of health plan premiums year after year. Following the passage of the ACA, the individual market also saw its fair share of eyebrow raising price increases. Those mark ups have since been reeled in by US regulators who have enacted Effective Rate Review to ensure any plan that tries to raise prices into the the double digits is scrutinized. This step has resulted in more tepid increases.
The same cannot be said of the small group space. Unlike the marketplace, there is little price transparecy in the small group health insurance market. A price hike for one business could be due to prior year claims. For example, if an employee had to utilize their health insurance for a significant health issue (which they clearly didn't choose to have, but that's what health insurance is for, right?), then the business may face a premium hike.
How a pre-tax fixed benefit can help small businesses
Admittedly, the health insurance marketplace was less attractive when it first launched. But it has since evolved and improved both in terms of variety, cost and trust. It's why more small business are turning to a pre-tax fixed health benefit — because owners see that their employees are finding quality plans that fit their needs.
The advantages are aplenty. By implementing a pre-tax fixed health benefit like an ICHRA, small business owners can reduce their costs, simplify their administrative tasks, and still provide excellent benefits to their employees.
Click here to learn more about how health benefits work with StretchDollar or get started today.
