Non-profits value providing health insurance to their employees. But for many non-profits, a traditional group health plan may not be cost effective for employees or the organization. Stand-alone Health Reimbursement Arrangments (HRAs) are a new alternative to employer-sponsored group health insurance plans. Stand-alone HRAs are gaining popularity with non-profits, as they provide non-profits a way to offer employees excellent health benefits without the cost or complication of group health insurance.
Why Non-Profits Want to Offer Health Insurance, But Struggle To Do So
The key reason non-profits offer health insurance is for recruiting and retention. Traditionally, offering a group health insurance plan was seen as the only way to offer a health benefit. However, many non-profits have not been priced-out of group health insurance.
The Department of Health and Human Service’s Agency for Healthcare Research and Quality estimated there were 498,429 non-profit employers in the US in 2011:
Nearly half of non-profits had less than 10 employees and two-thirds had less than 50 employees.
Only 47% of non-profits with less than 50 employees provide employees health insurance coverage.
With limited access to capital, small non-profit employers are often hard-pressed to offer or maintain health insurance coverage for their employees.
Health Insurance Options for Non-Profits
As a result, educated non-profits are switching to stand-alone HRAs to offer flexible, cost-controlled and sustainable employee health benefits. Stand-alone HRAs are also referred to as defined contribution health plans. Rather than paying the costs to provide a specific group health plan, non-profits can fix their costs on a monthly basis by establishing a stand-alone HRA. The general concept of a stand-alone HRA Plan is that a non-profit would:
Cancel the organization's group health insurance plan (if one is currently offered)
Define any amount the organization can afford for health benefits
Use HRA Software to give each employee a fixed dollar amount to use on medical expenses
The non-profit selects any insurance professional to assist the organization in giving employees a resource in selecting a plan. And/or, the organization provides information on the new Health Insurance Marketplaces.
Employees purchase their own individual/family policies, and choose how to spend their healthcare allowance.
A stand-alone HRA is an affordable alternative to an employer-sponsored group health insurance plan. HRAs by themselves are not health insurance plans.
Non-Profit Health Benefits: Control & Predictability
A stand-alone HRA gives a non-profit complete control of the cost and design of the benefit, allowing a non-profit to meet their budget and provide predictability to the board of directors. With a stand-alone HRA, non-profit leadership decides:
Amount of HRA allowances, and the ability to design different allowance amounts by class of employee (ex: $250/month for Directors and $125/month for entry-level case workers)
What happens to unused balances at the end of the year (ex: full balance rollover or "use it or lose it")
What types of medical expenses to reimburse (ex: all expenses allowed by the IRS, including individual health insurance premiums, or a limited number of categories)
Who is covered (ex: employee and dependents, or just employee)
Employee eligibility criteria (ex: a waiting period for new hires, or eligibility based on hours worked)
Employee cost-sharing options (ex: an HRA co-insurance or HRA deductible)
