How the QSEHRA May Help Small Accounting Firms

While the legislative drama surrounding health care claimed most of the employee benefits headlines in 2017, a new benefit quietly helped accounting firms and their small business clients to offer health benefits for the first time.

Created by Congress in December 2016, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) allows businesses with fewer than 50 employees to reimburse employees tax-free for individual health care expenses. With the QSEHRA, businesses offer employees a monthly allowance of tax-free money and employees purchase the personal health insurance policies and other products and services that best fit their needs.

Last year, thousands of small businesses took advantage of the QSEHRA and offered employees health benefits for the first time.

On average, employees used nearly 80 percent of the money available to them. They were also able to get value from the QSEHRA regardless of where they lived, what their coverage status was, or whether they had unique health care needs.

Many small accounting firms have already found success with health insurance reimbursement, whether with their own firms or through advising small business clients. This is particularly true for those struggling to offer traditional group benefits.

Here are a few specific ways the QSEHRA may be able to help accounting firms and their small business clients improve their benefits offerings.

The QSEHRA allows small businesses to offer benefits on their own budget.

One of the most obvious ways the QSEHRA provides value is through cost savings to the business.

Because many small businesses can’t afford a group health insurance policy, the QSEHRA provides one of the only ways they can offer a benefit while maintaining control over their expenses.

According to the PeopleKeep 2018 QSEHRA annual report, small businesses set average monthly allowances of $280 per single employee and $477 per employee with a family.

This budget represents a significant cost difference compared to what businesses would pay under a group policy. The Kaiser Family Foundation’s 2018 Employer Health Benefits Survey shows that small businesses that offered a group policy spent an average $455 per employee per month for single coverage and an average $800 per employee per month for family coverage.

That’s a cost difference of 38 percent and 47 percent, respectively, when compared with the QSEHRA.

The QSEHRA offers value to all employees.

With traditional benefits options like group health insurance, a business’s benefits offering is valuable to only some of its employees.

Employees who choose to remain on their spouse’s or parents’ insurance, for example, won’t participate in the business’s group policy. Other employees may opt out if the premium is too high or if they need to purchase personal coverage due to a unique health need.

With a QSEHRA, tax-free money from the business is available regardless of the employee’s situation. Roughly 40 percent of employees who participated in a QSEHRA in 2017 submitted a personal premium for reimbursement, but the QSEHRA isn’t restricted to premium reimbursement.

Employees also submitted an average of eight nonpremium expenses for reimbursement during the year, including amounts paid toward copays, deductibles, and prescription and nonprescription drugs.

Overall, employees used 77 percent of their QSEHRA allowances in 2017, signifying value to every benefit participant.

The QSEHRA gives employees more choice in their health insurance.

Numbers aside, the QSEHRA provide employees with two distinct advantages over group health insurance: choice and portability.

By selecting a policy through the public marketplace, employees can choose the coverage that best suits their needs, rather than having their company decide for them. Employees can also look for policies that cover their preferred provider networks or allow them to open a Health Savings Account (HSA).

And unlike group health insurance, individual health insurance is portable. This means employees don’t lose their insurance when they switch jobs.

Both advantages reflect positively on the company, which can use this unique benefits approach to hire and keep the best employees.

Deciding on a QSEHRA

For the many small accounting firms that are looking for a benefits solution outside traditional group insurance plans, either for themselves or for their clients, the QSEHRA represents a strong option. It promotes employee choice, offers cost control to the firm, and is unlikely to be materially changed by congressional whims.

Those firms who opt for a QSEHRA and administer it appropriately will find themselves with a benefits solution that serves the company for years to come.

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Caitlin Bronson is the content writer for PeopleKeep. A professional communicator in the insurance space, she has worked with brokers, agencies, and financial advisors to navigate health care reform and other policy changes.

Firm Management