This business employed a team of 20 employees in New Mexico and offered all of its employees fully paid gold-level health insurance for an annual cost of $250,000. They were happy to provide the highest level of coverage for their team but were also interested in ways to save on their healthcare costs. The company hoped to provide the same level of coverage for less, freeing up budget to provide additional benefits and employee perks.
In many states, rates for individual healthcare plans on the state’s exchange are more affordable than those for small group plans. Then companies can use an HRA to directly reimburse employees for the cost of their health insurance premiums. This helps employees save money on their healthcare costs while saving companies money on their overall healthcare budget.
With a Liferaft Health Expense Account, the employer reimbursed every employee for their cost of purchasing a gold-level plan on the individual exchange. If a silver-level plan was more in line with their needs, employees could use the remaining funds in the account for other health-related expenses, as defined in their company plan.
This employer is now paying $93,500 annually to provide a more flexible version of the same level of coverage—ultimately saving them over $150,000 each year.
While a Liferaft Health Expense Account has many different use cases, it can be particularly effective in providing major medical insurance in states where the rates for health insurance on the state’s exchange are cheaper than group health insurance rates.
Through the Health Expense Account, employers can reimburse the individual for their own health insurance premiums rather than paying for a group plan. The chart below shows the states that have the most significant cost differences when comparing individual versus group plans.
When moving to a Health Expense Account for your company’s major medical insurance, the Liferaft team will analyze your employee census and make a unique plan recommendation for each employee. Plan recommendations will consider each employee's specific location, age, family circumstances, and the plan’s provider network quality. This guidance will allow employees to confidently choose the best possible coverage for their needs and budget.
A Liferaft Health Expense Account is fully customizable based on what makes the most sense for your organization. Our team will handle all the paperwork to properly set up your account—making it easy for you to benefit from all available tax advantages.
According to the IRS, employer-issued reimbursements are not considered income and are exempt from federal income and payroll taxes. This is one of the significant tax benefits of distributing employee benefits through a Liferaft Health Expense Account.
One of the central values of a Liferaft Health Expense Account is flexibility, and the answer here depends on the employer’s specific policies. Some companies may have a "use it or lose it" policy regarding account funds, meaning that any funds not used by December 31st will be forfeited and cannot be carried over into the new year. Other employers allow employees to roll over a certain amount of money from one year to the next. Put plainly—it’s up to you!
Because the funds in a Liferaft Health Expense Account are employer-funded, the employer owns the money in the account even though it is for the individual to use. If the person leaves the company or their job is terminated, the account funds stay behind with their former employer. Employers can offer a retirement account that allows former employees to utilize funds after leaving the company.
Additionally, different employers often have different rules for reimbursement, which can be a problem for employees if they switch companies. Aside from mandatory requirements like COBRA continuation, ERISA and HIPAA, plans can vary widely.
Liferaft Health Expense Accounts can be offered to any employee, as long as each job class is treated equally. This means you can easily provide benefits to part-time and seasonal employees. However, depending on what type of expenses you plan on reimbursing, there are specific IRS requirements. After learning about your business and goals, Liferaft will make a plan recommendation for the most tax-advantaged, affordable way to structure your account.
If you're interested in learning more about how to save money on your business' healthcare expenses, sign up for a free 15-minute consultation with our team at Liferaft. Many of our clients have also found Liferaft's free Guide to Health Reimbursement Arrangements a comprehensive overview of how health expense accounts work and why companies are using them.