The search for small benefits the company's health often begins with group health 
insurance quotes, review of different carriers, coverage levels and costs. But if you are in a state of shock sticker or a group policy is simply not a good fit, what are your options? Here is a savvy approach many small employers take: do not offer group health insurance coverage. Instead, offer a formal benefits program to reimburse employees for individual health insurance policies.
This approach is a viable solution for small businesses because employees have access to quality, personalized health insurance coverage and control company costs by setting an amount monthly contribution to qualified premiums. In fact, the average employer could fully finance an individual family policy for less than they could finance part of the coverage of this family under a group policy.
However, I may be getting ahead myself. In this article, I will first walk through the average cost of individual health insurance, so I'll cover how to provide a refund of the employer complies (a "contribution"), and finally I'm going to boil down the cost of the employer.
Note - This blog is based on our new infographic, 7 truths about the cost of health insurance in America. Check out the full infographic here.
individual health insurance costs 43% less
To understand why a repayment approach works so well, consider this - on average, health insurance individual policies cost less a small insurance policy group. . Look at national data
For single coverage, an individual policy costs $ 3,587 per year on average - a 43 percent savings compared to the coverage group average $ 6,251 per year. Factor in the tax subsidies available for individual coverage and savings increase to 60 percent per year
For family coverage, an individual policy costs $ 10,739 per year on average -. A 39 percent savings compared to the coverage group average $ 17,545 one year. If eligible for tax subsidies, savings for the average single family coverage 68 percent.
Unfamiliar with how the insurance group health and individual health insurance stack up? Here is a useful table:
Chart Source - 35 answers to common questions about individual health insurance Money
How to Pay Employees for individual health insurance
you may have heard that you can not pay or pay for each employee health insurance policies. In some cases this is true. As part of the reform of health care, there are new penalties for noncompliant reimbursement or payment plans. However, there are also two ways to help employees comply with the cost of individual health insurance.
The first is for the company to set up a section 105 tax advantageous repayment plan to give employees a health care allowance to use on health insurance premiums. Think of it as an account of business expenses or gift card for health insurance
Here's how it works :.
- Step 1: Company establishes a formal repayment plan, defining the criteria of eligibility and monthly allowances of health care
- Step 2: .. employees buy their own health, their own money
- Step 3: employees submit a refund request, usually a third or online software platform.
- Step 4: The claim is reviewed and justified (again, usually by a platform as PeopleKeep) and the company reimburses employees for expenses approved by the pay by check or direct deposit.
The second way is to offer increases or tax-free allowances to cover employee health insurance. However, because of the benefits-tax associated with a formal repayment plan, most companies and employees prefer this route.
The cost of the employer
The beauty of the person repayment of health insurance is the amount of the contribution is completely set and controlled by the company.
As indicated above, the individual health insurance costs about 40 percent less than comparable group health insurance premiums so that the dollars of the company's health are stretched further. And unlike traditional group coverage, there is no minimum contribution amounts.
The exact rates vary by location and employee demographics. Here is an example
savings from typical costs (based on 2014 Medicare costs for the state of Illinois). In this example, a company of 45 people has saved $ 275,058 per year (61 percent) with no reimbursement from health insurance
Source Chart - . 35 Answers to common questions about individual health insurance Money
Conclusion
health benefits are an essential component of compensation offered to employees, yet with climbing costs, meet the expectations of employees is increasingly difficult. A particularly well suited for small employers solution is to implement a rebate program for individual health insurance. The cost? Whatever the company allocates. Bottom line? The average employer could fully fund an individual family policy for less than they could finance part of the coverage of this family under a group policy.
What questions do you have on individual health insurance, reimbursement or cost for employers? Leave a question below. We would be happy to help you answer.
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