Nonprofits Want More Cost-Effective Alternatives to Group Health Insurance

In the meantime, many are satisfied that qualified small employer health reimbursement arrangements (QSEHRAs) meet employees’ needs.

The 21st Century Cures Act signed into law by President Barack Obama on December 13, 2016, provides a new, lower-cost way for the smallest employers to offer a health benefit to employees.

Small employers (those with 50 or fewer full-time or full-time equivalent employees) can now sponsor special tax-favored health reimbursement arrangements—called qualified small employer health reimbursement arrangements (QSEHRAs)—to help employees pay for health care costs, including premiums for individual health policies, on a standalone basis without having to satisfy the market reforms of the Affordable Care Act (ACA).

A survey by PeopleKeep found 71% of small businesses that offered the new QSEHRA in 2017 had not offered health benefits previously.

In its new “Nonprofits on benefits: 2019 report,” PeopleKeep says, “Offering competitive health benefits is as important to nonprofit groups as it is to for-profit businesses. But small nonprofits often lack the resources of larger groups and for-profit businesses.”

PeopleKeep surveyed more than 100 nonprofit and religious organizations using the QSEHRA and found 81% said cost was one of their most pressing challenges in finding a health benefit that fits their needs. Just 18% of nonprofits surveyed had ever offered a group policy.

Through a QSEHRA, the nonprofit offers employees a fixed monthly allowance of tax-free money (up to $429.17 per single employee and $870.83 per employee with a family in 2019). In 2018, nonprofits offered average allowance amounts of $311 for single employees and $473 for employees with a family. Within the nonprofit category, religious organizations offered average allowances of $280 per single employee and $597 per employee with a family.

Cost was the biggest factor in nonprofits’ choice to offer the QSEHRA. More than 80% of respondents said their ability to set fixed allowance amounts through the QSEHRA was a better budgetary fit than group health insurance.

Fifty-two percent cited diverse employee situations as an important reason they chose the QSEHRA. Unlike group health insurance, the QSEHRA provides reimbursement for at least some medical expenses regardless of the employee’s age or insurance status, PeopleKeep notes. The QSEHRA also helped 11% of nonprofits provide health benefits to employees who live across state lines.

Overall, nonprofits are highly satisfied with the QSEHRA; 93% of nonprofits said they were either very likely or extremely likely to recommend the QSEHRA as a health benefit to other nonprofits.

However, they’re also eager to see more cost-effective alternatives to group health insurance. Support for a “Medicare for All”-style policy among nonprofits is growing; one-third of respondents said they were extremely interested in such a change. This is a divisive public policy proposal, however. Twenty-six percent of nonprofits said they had no interest in Medicare for All, and another 26% said they didn’t have an opinion on the policy.

PeopleKeep found that nonprofits were far more bullish on general federal government action to increase health benefits options. Fifty-four percent of survey respondents said they were extremely interested in seeing federal action to increase benefits options, and another 14% said they were very interested. Only 1% indicated no interest at all. Suggestions tended to focus on supporting health care cost control, ranging from more HRA vehicles to government control of prescription drug prices.