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In today's competitive hiring environment, the high cost of providing health and wellness benefits can put small employers at a competitive disadvantage. Only 39% of organizations with three to nine employees and two-thirds of those with 10 to 200 workers offered health benefits in 2022, compared to 99% of large companies, a KFF survey found.
Many are turning to Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), which enable small businesses with fewer than 50 full-time equivalent employees to provide tax-free reimbursements for their health insurance premiums and other qualifying health expenses.
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For example, when Ximplifi, an accounting software provider in Wichita, Kan., began to hire employees from multiple states, it realized it needed a health benefit to recruit and retain potential employees. As a small, remote company, traditional group health insurance was too expensive and complicated to implement across several states. Since implementing a QSEHRA, Ximplifi has saved $67,000 compared to what it would have spent on traditional group health insurance.
The average monthly allowance provided by employers offering QSEHRAs through PeopleKeep has increased by almost 40% in the last four years, according to a report from PeopleKeep, which provides personalized benefits for small to midsized organizations Other key findings from the report include the following:
- The longer companies offer QSEHRAs, the higher the allowance they provide– an average of $448 at six years compared to $397 in the first year.
- Companies with one to four employees have the largest allowance at $439, compared to larger companies with up to 49 employees.
- The percentage of companies that enabled employer-sponsored premium reimbursement reached 31% in 2022, an eight-point year-over-year increase.
- The average monthly allowance offered by employers in 2022 rose to $412 from $402 in 2021, covering nearly all of an average lowest-cost self-only silver plan premium of $428 for a person aged 40.
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"The QSEHRA 2023 Report highlights the legislation's achievement by showing the growth in popularity and efficacy of the benefit over time," said Victoria Glickman Hodgkins, CEO of PeopleKeep, "We can see through the data that companies that offer QSEHRAs utilize it more and better over time, committing to higher allowances and expanding offerings for their employees.
"Through the QSEHRA, small businesses can avoid the drawbacks of traditional group health insurance plans like expensive premiums, annual rate hikes and restrictive participation and contribution requirements."
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
