With only three employees, this business struggled to find a group plan that would accept them. Affordable plans had minimum participation requirements that they didn't meet, and the plans available had astronomical rates. They assumed they couldn’t provide health insurance until their team grew.
For companies just starting to provide health benefits for their team, a Health Reimbursement Arrangement can be a great option. These plans allow employers to control costs, provide flexibility, and easily scale their benefits as their team grows.
Most insurers require a certain percentage of eligible employees to participate in the healthcare plan (often 75 percent). These participation requirements often limit smaller employers to offering a single health plan. Liferaft’s Health Reimbursement Arrangements have no participation requirements and give employees the freedom to choose the best healthcare plan for their region, family, and health situation.
Smaller businesses have limited negotiating power and can be stuck with higher premiums than if their employees purchase health insurance through the individual market (see below). As healthcare premiums continue to rise, employers stuck in a small group insurance plan don’t have control over increasing costs. Premium rate increases can present fiscal challenges for new businesses just beginning to offer benefits.
With a Liferaft Health Reimbursement Arrangement, employers decide how much to reimburse their employees, what expenses to repay, and how frequently to process reimbursements. This flexibility makes it easy to set up a plan that works for your business' nuances and budget.
With a Liferaft Health Reimbursement Arrangement, the business was able to quickly start offering health insurance to the team and their dependents. First, the organization set a monthly reimbursement budget they could afford, and the Liferaft team recommended the best health insurance options for each employee based on their location, age, family circumstances, and the plan’s provider network quality. This allowed employees to confidently choose the best possible coverage for their needs and budget.
Then as the business grew, the organization easily added new employees with just one click in Liferaft’s 100% digital platform.
While a Liferaft Health Reimbursement Arrangement 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 Reimbursement Arrangement, 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 Reimbursement Arrangement 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.
When using a Liferaft Health Reimbursement Arrangement to reimburse employees for health insurance premiums specifically, there are some IRS limitations on what types of businesses can claim those expenses as non-taxable. Companies not eligible for this specific tax advantage through the LiferaftHealth Reimbursement Arrangement are those with no W2 employees, S-Corporations in which an owner and spouse own more than two percent of the business, and Sole Proprietorships.
A Liferaft Health Reimbursement Arrangement is an excellent option for small businesses because it is affordable and can be tailored to the business's and its employees' specific needs. In addition, as the business grows, the account can easily accommodate the increased number of employees without worrying about minimum participation requirements, enrollment periods, or premium increases.
A Liferaft Health Reimbursement Arrangement 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 Reimbursement Arrangement.
One of the central values of a Liferaft Health Reimbursement Arrangement 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 Reimbursement Arrangement 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 Reimbursement Arrangements 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.
Our team knows the ins and outs of the health insurance marketplace and will guide you towards the solution that make the most sense for your business and your team. Come with questions! Our experts are happy to dig into the details to get you the clarity you need.
During the call, Liferaft will run a cost-benefit analysis on your company's current healthcare spending and show you different ways you can save—without sacrificing plan quality. After your consult, Liferaft will design a unique plan for your employee's health insurance, including suggested plans and accounts, plan policy documents, and the annual budget.