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According to the Kaiser Family Foundation, the average cost of providing health benefits to a full time employee now tops $7,911 per year for single coverage.
If the employee has a family, the total cost nearly triples: it costs $22,463 for a family coverage.
Yes, employees pick up part of the tab. About a third of it on average, depending on the employer.
But these massive premiums are still not sustainable for most small businesses.
Nor are they great for employees, who are often struggling to shoulder the monthly cost of health insurance themselves.
There has got to be a better way.
And it turns out there is: offering health sharing as an employee benefit.
This blog will discuss how small business owners and even independent contractors can opt out of the crazy health insurance cost spiral.
You’ll also learn how you can offer a more affordable, cost-effective solution that still provides a robust health benefit for employees – and saves thousands of dollars per worker in the process.
Generally, small business owners who want to offer an employee health benefit have four basic options:
How Does Health Sharing Work?
In a health sharing program, individuals voluntarily join a like-minded community or association, often organized around shared values or beliefs.
Members commit to leading healthy lifestyles and pledge to support one another in times of medical need. This commitment extends to the financial aspect, as members collectively contribute to a central fund or pool.
Many health sharing organizations are faith-based. Some are focused on specific religious denominations. Others are non-denominational or even completely secular and open to everyone.
Contributions and Eligible Expenses
Members make regular monthly contributions to the health sharing organization, just as most people do with insurance premiums.
When a plan member incurs a medical expense that qualifies under the program’s guidelines, they submit a claim to the health sharing organization. These expenses could be doctor visits, hospital stays, surgeries, and even certain preventive services.
Cost Sharing Mechanics
Once a request is approved, the health sharing organization facilitates the transfer of funds to members who have medical needs that month.
The health sharing organization coordinates the distribution of funds either to the member or directly to the healthcare provider.
How is Health Sharing Different from Health Insurance?
Voluntary Participation: Health sharing is a voluntary arrangement based on shared values.
There’s never any requirement for employees to participate. There are no minimum participation numbers to hit when you offer health sharing as an employee benefit.
Underwriting and Exclusions: Unlike traditional health insurance plans, healthshare programs typically have waiting periods for pre-existing conditions.
That means that if a new enrollee has a pre-existing condition, the plan will limit sharing for expenses related to that pre-existing condition for a period of time.
Enrollment periods: Your workers can also sign up for a health sharing all year round. Health insurance companies only allow new enrollments when the employee is first eligible for the plan, and during open enrollment period thereafter.
Central Fund vs. Insurer: Health sharing relies on a central fund managed by the sharing organization, whereas group health insurance involves coverage provided by an insurance company.
Taxation: health insurance can be provided as a tax-free benefit. The contribution made by the business for health sharing memberships, while tax-deductible for the business, would be considered taxable to the employee.
Regulation: Group health insurance is subject to state regulations and to the Affordable Care Act.
Because health sharing is not insurance, these programs are not typically regulated under state Department of Insurance regulations, nor under the laws of the Affordable Care Acts.
Offering health sharing as an employee benefit can be a strategic move for small businesses looking to save money while providing valuable healthcare options to their employees. Here are some key ways in which health sharing benefits small businesses:
Health sharing plans typically come with substantially lower monthly contributions (akin to premiums in traditional insurance). Typically health sharing will be less than half the cost of health insurance.
This reduction in fixed costs can substantially alleviate the financial burden on small businesses, especially when compared to the often steep premiums associated with traditional group health insurance.
As with health insurance, health sharing programs allow employers to contribute to their employees’ monthly sharing contributions.
Small businesses can adjust these contributions based on their budgetary constraints and the level of support they wish to provide.
Unlike group health insurance, which involves complex administrative tasks such as claims processing and managing an insurance plan, health sharing arrangements are typically administered by the health sharing organization itself.
This means less administrative overhead for the employer, freeing up time, staff, and resources.
Small businesses can choose health sharing plans that align with the specific needs and preferences of their employees.
This flexibility ensures that employees receive benefits that are relevant to them, which can contribute to higher job satisfaction and retention rates.
Contributions made by employers toward their employees’ health sharing is tax-deductible, offering another avenue for cost savings.
However, it is important to note that any money contributed towards an employee’s healthshare membership will be considered as taxable income to the employee.
Health sharing encourages a sense of shared responsibility among participants.
When employees are invested in managing healthcare costs wisely, it can lead to better healthcare utilization and reduced overall expenses.
Health sharing programs, often structured around religious or nonprofit principles, may be exempt from certain insurance regulations.
This can lead to fewer compliance requirements and potential savings on regulatory costs.
Health sharing allows employees the flexibility to choose healthcare providers without network restrictions, potentially leading to cost savings when they can access care that fits their budget.
Competition for quality employees is fierce.
Offering a cost-effective alternative healthcare solution like health sharing can make a small business more competitive in attracting and retaining talented employees.
This is the biggest reason small businesses are offering healthsharing.
