Because
group insurance rates are two to three times as expensive as
individual plans, we believe that the best option for
most small businesses of less than 20 employees is to let the
employees sign up for individual coverage, rather than group
coverage. These are the main advantages of this strategy:
- Individual
plans are 100% portable, meaning that they are not tied to
the employer's business. The employee can take the coverage
with them, wherever they go.
- Because
they are individually underwritten, they are much less expensive.
However, this also means that someone could be declined due
to pre-existing conditions. So individual plans only
work if the employees are all in good health.
An
employer cannot pay for individual health insurance, but you
can reimburse your employees tax-free through a Section 105
HRA Plan. An HRA, or Health Reimbursement Arrangement, is simply
an agreement that the employer makes to reimburse certain medical
expenses, including health insurance, that the employee incurs.
The reimbursement is considered a tax-free fringe benefit to
the employee, and a business expense for the employer.
The
end result is that you may be able cut your costs in half,
while providing your employees with better coverage. This
works well for small businesses with healthy employees.
To learn about whether individual health insurance coverage
and an HRA plan is right for you and your employees, please
enter your contact information below to order our special report:
