Rising healthcare costs have forced many nonprofit organizations to analyze their current healthcare spending. According to the U.S. Bureau of Labor Statistics, 47 percent of nonprofits with fewer than 50 employees offer health insurance to their workers. Limited funds and tight resources make it challenging to secure health insurance that is both affordable and attractive to job seekers. Fortunately, there are ways that nonprofits can reduce healthcare spending while still delivering key benefits to valued employees.
Select A Plan With A High Deductible
High deductible health care plans offer nonprofit organizations a cost-effective solution with incentives that drive employees to seek value-based care. A high deductible health plan (HDHP) is a type of insurance policy with a higher deductible than a traditional health insurance plan. In return for a high deductible, the policyholder usually pays a lower monthly premium.
A HDHP may be combined with a health savings account (HSA), allowing policyholders to pay for certain medical expenses with tax-free money. In 2021, the IRS refers to a high deductible health plan as a plan with a deductible of a minimum of $1,400 for self-only coverage and $2,800 for family coverage, unchanged from 2020.
Policyholders should consider out-of-pocket maximums when selecting a plan with a high deductible. In 2021, the limit on out-of-pocket expenses, including items such as copayments, deductibles and coinsurance, is $7,000 for self-only coverage and $14,000 for family coverage.
Businesses with a relatively healthy workforce that do not anticipate many medical expenses for the upcoming year can benefit from choosing an HDHP. However, nonprofits must ensure that they can afford the out-of-pocket maximums that may transpire in a worst-case scenario.
Offer Individual or Family Plans
Controlling costs has become a major challenge for nonprofits that offer health benefits to employees. According to the Kaiser Family Foundation, the average national cost to cover an employee with group health insurance has increased 174 percent over 15 years. However, offering individual or family plans may reduce healthcare spending.
Before deciding on health benefits on behalf of the nonprofit, understand the unique needs and priorities of all parties involved. Host a meeting or conduct a company-wide survey to determine what benefits are most important to employees. Learn about the medical needs and health history of employees and their families to determine the level of risk.
Depending on the circumstance, an employee may apply for either an individual or family health plan. Both options have requirements based on age, family size and in some cases, income. Individual health plans only cover one person, the employee, whereas family plans cover two or more people, such as a spouse and children.
Adding a spouse or child to a family health plan increases the monthly premium based on the number of people covered. Deductibles and out-of-pocket maximums are also generally higher for family plans. Determine how many employees require an individual plan versus a family plan to see where the business can reduce healthcare spending.
Consider a Health Reimbursement Arrangement
Nonprofit organizations may consider a health reimbursement arrangement (HRA) to reduce healthcare spending. Available through an Individual Coverage HRA (ICHRA) or a Qualified Small Employer HRA (QSEHRA), health reimbursement arrangements reimburse employees for out-of-pocket medical expenses.
Under an HRA, the nonprofit sets aside a specified sum each month per employee. Employees then purchase their own health insurance policies from their state’s marketplace or through an insurance broker. Payments made by nonprofit organizations through an HRA are free of payroll tax. Reimbursements received by employees through an HRA are free of both payroll tax and income tax.
An HRA is not a type of health insurance, but rather an arrangement that enables employees to receive a monthly allowance of tax-free money to be used for a wide range of medical expenses. Health reimbursement accounts can reimburse any expense that is considered a qualified medical expense under Section 213(d) of the Internet Revenue Code.
Expenses that are eligible under an HRA include individual health insurance premiums, individual vision or dental premiums, copays, prescription drugs, office visits, amounts paid towards deductibles, nonprescription drugs with a doctor’s note and mileage for travel to and from eligible health care. Some HRAs may restrict certain items from reimbursement.
Retain Top Talent
According to a Glassdoor Employment Confidence Survey, 40 percent of respondents reported that they valued healthcare insurance more than a pay raise. Offering a comprehensive employee benefits package allows a business to remain competitive.
An attractive employee benefits package that includes medical coverage is an effective way to minimize absenteeism and increase productivity. Affordable healthcare also improves company morale by investing in happier, healthier employees. Employees with access to the healthcare they need often perform better in the long-term.
Employer-sponsored healthcare insurance is also useful for recruiting and retaining talented employees. Nonprofits understand the importance of hiring competitively to gain employees that will work hard on behalf of the organization. Cost-friendly benefits serves as an enticing incentive for job seekers and established employees.
Nonprofit organizations may also find other ways to reduce healthcare spending without sacrificing the health needs of employees, such as by offering a wellness program. Wellness programs are often provided to employees as a preventive measure to reduce illnesses while maintaining the general health of workers.
Common benefits of a wellness program include weight loss, gym memberships, smoking cessation, medical screenings, immunizations and recreational programs such as company-sponsored sports teams.
Speak With A Nonprofit Employee Benefits Consultant
Compared to for-profit enterprises, nonprofit organizations often face more challenges when selecting healthcare benefits due to fewer resources. However, nonprofits can still find ways to reduce healthcare spending; from high deductible plans to health reimbursement arrangements, nonprofits have access to a wide array of strategies for reducing health expenses.
Work with a reputable insurance broker to gain insightful consulting services designed to help the organization grow and thrive. Nonprofit employee benefits consultants gather critical information and tailor a strategic plan that aligns with the organization’s vision and goals. To learn more about how nonprofits can reduce healthcare spending, speak directly with a nonprofit employee benefits consultant at Business Benefits Group today.