Many small businesses using QSEHRA to offer health benefits for first time, survey finds

More than 70 percent of small businesses that used the new qualified small employer health reimbursement arrangement (QSEHRA) in 2017 did so to offer employee health benefits for the first time, according to The QSEHRA: Annual Report 2018 from PeopleKeep.
Drawing on data from more than 600 small businesses and nearly 4,000 employees, the report offers the industry’s first look at how the new QSEHRA benefit is being used. The report also examines how the QSEHRA compares to traditional group health benefit options, like group health insurance.

New benefits vehicle.

The QSEHRA, which was created through the 21st Century Cures Act in December 2016, is a new vehicle small businesses can use to offer personalized health benefits. With a QSEHRA, businesses offer employees a tax-free monthly allowance. Employees then choose and pay for health care, including insurance policies, and the business reimburses them up to their allowance limit.
There are no minimum contribution requirements, and small businesses can offer different allowances to employees based on whether they have a family.
For the vast majority of small businesses that used the new benefit, the QSEHRA provided a way to offer health benefits for the first time. More than 70 percent of businesses that used the QSEHRA previously offered no health benefits, and the average allowance amount chosen by businesses ($391 per month) represents a maximum cost of between 38 percent and 47 percent less than what small businesses contributed to group health insurance premiums in 2017.
At the same time, more than a quarter of employees that used the QSEHRA were reimbursed for both premium and non-premium expenses—something not possible under a group health benefit.

Key findings.

Some of the key findings from the report are as follows:

  • Among businesses that offered a QSEHRA in 2017, 71 percent did not previously offer employee health benefits. Nearly 20 percent previously gave employees a taxable stipend for health care, and 6 percent previously offered traditional group health benefits.
  • Small businesses gave an average monthly allowance of $391.06 per employee in 2017, or $280.20 per self-only employee and $476.56 per employee with a family. Nearly a quarter (22 percent) of employees received the federal maximum monthly allowance of $412.50 per self-only employee and $833.33 per employee with a family.
  • Smaller companies typically offered higher allowance amounts, with 1-person companies offering an average $387.50 per self-only employee and $645.58 per employee with a family. That’s compared to companies with 31 to 50 employees, which offered an average $246.07 per self-only employee and $309.85 per employee with a famil.
  • U.S. states offering the highest average allowance per employee were South Dakota ($833.33), Connecticut ($638.22), West Virginia ($648.48), Delaware ($564.06), and Maine ($536.36).
  • In 2017, 40 percent of employees submitted at least one premium expense for reimbursement, including 41 percent of self-only employees and 39 percent of employees with a family.
  • Employees were much more likely to submit a premium for reimbursement if they received a larger monthly allowance amount. For example, just 25 percent of self-only employees who received $100 or less submitted a premium as compared to 48 percent who submitted a premium while receiving between $301 and $412.50 a month.

The report also found that employees in 2017 used an average 78 percent of their QSEHRA allowance, or 79 percent among self-only employees and 77 percent among employees with a family. More than half (52 percent) of employees used 100 percent of their QSEHRA allowance, including 24 percent of employees who received the federal maximum allowance. Average QSEHRA allowance amounts are 38 percent smaller than average business contributions to the group premium for single coverage and 47 percent smaller than average business contributions to the group premium for family coverage, according to the report.

SOURCE: www.peoplekeep.com
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