Q: We have fewer than 5 employees. How can we provide health insurance benefits for them?
A: Many of us have health on our minds. The health insurance market is confusing, so I asked three experts for their advice:
Account Executive – Employee Benefits
Vice President of Client Services
Nonstop Administration and Insurance Services, Inc.
Regional HR Consultant
With pressure on nonprofit staff higher than ever, conscientious organizations are looking for better ways to care for their people. Chris Fountas of Nonstop points out that employer-sponsored health insurance benefits boost recruitment, healthy organizational culture, and employee retention. Access to healthcare is an equity issue, too.
I hope this serves as a starting point for your own research. Let’s start small, with individual plans, and work our way up.
Many small nonprofits choose to reimburse or pay the employee for their individual plan (partially or in full). The employee can use a stipend to purchase a plan. They may need to supplement the stipend to cover the full cost.
Find individual plans on the open exchange, Washington Healthplan Finder. Now is a good time to do your research. Special enrollment has been extended through August 15, 2021. The next open enrollment period opens on November 1, 2021. Some providers, such as Kaiser Permanente, offer individual plans directly.
Consult with a licensed tax professional to understand the IRS rules for documentation so that these payments are not taxable as income for the employee. As Robert Ricciardelli says, “The problem with reimbursement is it is taxable for the individual receiving it as income, and the organization will be paying some payroll taxes for dispersing it. Whereas with a group plan, there are no taxes for paying toward a plan or receiving a plan.”
One strategy for overcoming the tax issue is setting up a Health Reimbursement Arrangement (HRA). A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) helps small employers (fewer than 50 full-time employees) contribute to employee’s premiums and some other health care expenses.
Another downside of reimbursement is that costs are not averaged—older people, women, and people with pre-existing conditions pay more. In addition, individual plans are not legally required to provide as much coverage as group plans.
One alternative is Gusto, a payroll and benefits platform that offers HR services with no minimum number of employees. Their services include consultation with a broker regarding health plan options or administration of health insurance reimbursement for employees. They offer a variety of services with administrative fees starting at about $45 per month ($39 per month plus $6 per person per month). They do not offer nonprofit discounts last we checked.
If your organization has two or more employees who are not related, consider group health insurance plans. A health insurance broker can identify plan options.
Ron Schmid recommends reaching out to other nonprofits to ask for referrals. He says that a broker should be able to name 2-3 nonprofit clients and demonstrate familiarity with plans specifically for nonprofit groups. Does the broker listen to your needs, understand your priorities, and provide good customer service? Will they present plans to employees? Fountas says, “A good broker should provide…comparative analysis…which clarify the difference in benefits (advantages and disadvantages of plan designs), pricing, and network (which doctors/facilities are included).”
Some people are wary of broker fees, but Schmid and Fountas agree: the fees are built into the product and cannot be removed, so the final cost is the same, whether the employer goes through a broker or not. Avoid brokers that charge smaller clients additional fees.
November 30, 2021 Update
Washington companies with two or more enrolled employees are eligible to participate in the Business Health Trust benefit program. Participation requires membership with Seattle Metropolitan Chamber of Commerce or one partner organizations:
- Bellevue Chamber
- Bellingham Regional Chamber of Commerce
- Bothell Kenmore Chamber
- Economic Alliance Snohomish County
- Tacoma-Pierce County Chamber of Commerce
- Thurston County Chamber of Commerce
- Greater Yakima Chamber of Commerce
Your membership in any of the above organizations automatically qualifies the organization for one of 13 industry group memberships (at no additional cost), along with advocacy, resources and savings.
Another option is joining a Professional Employer Organization (PEO). A PEO acts as the employer of record on the nonprofit’s behalf. JustWorks is a PEO serving organizations with a minimum of 2 W-2 employees. JustWorks handles benefits, payroll, W-2 filings, training, paid time off, retirement plans, and more. They offer a nonprofit discount when your organization qualifies for the next tier’s pricing. You can save an additional 15% if you pay annually.
Professional Employer Organizations (PEOs) allow organizations to bundle payroll, benefits, compliance, and HR. You join a bigger negotiating group, meaning you get access to pricing normally available to larger employers.
Choosing a PEO is like finding a broker. Fountas says nonprofits should consider:
- the number of plans they offer,
- administrative services,
- the software platform,
- customer service,
- and whether the fees are included in the rates.
Trinet is a PEO that offers HR solutions, including affordable insurance, to organizations with 5 or more employees. If you have fewer than 5 employees, a representative can still connect you with a local broker. Ricciardelli adds, “in some cases we are now starting to do under 5 again on a case-by-case basis.” Members of Washington Nonprofits save 25% on TriNet services (affiliate link).
A PEO may not be worth the cost if the organization does not use many of its services. Fountas points out another disadvantage: the PEO can make decisions without the employer’s input. For example, they may change from one healthcare provider to another. The employer’s only recourse is to leave, which may mean losing coverage and services.
For state-funded nonprofits with 5 or more employees, Washington Counties Insurance Fund is another option.
Nonstop is one of our business members. Their plans are intended for larger organizations with 50 or more employees. Nonstop developed an executive guide to build equity into your health plan with strategies for reducing costs and improving employee benefits.
National Association of Socially Responsible Organizations (NASRO) list of health insurance options.
Remember, nonprofits are corporations: all the systems that support small businesses are also available if they fit your budget. Your local chamber of commerce may offer group health plans to business members. Find your nearest chamber using the Washington Chamber of Commerce Executives’ directory. Costco also offers group health plans to their business members in Washington state. Learn more here.
These are just some of the options we’re aware of. It’s not intended to be an exhaustive list. If you’re aware of other ways for nonprofit employees to access health insurance, please reach out.
Thank you for prioritizing your employees’ health and wellbeing!