By *Updated Nov 7, 2019. As a small orthodontics practice, you may find yourself struggling to find affordable healthcare for your staff, but still want to take care of your employees and remain competitive in the job market. A relatively new law allows you to reimburse your team tax-free for healthcare expenses. It’s called a QSEHRA and it might just solve your health insurance problem.
Here’s what to know about QSEHRA and health insurance for orthodontists.
What’s a QSEHRA?
QSEHRA (Qualified Small Entity Health Reimbursement Arrangement, or Small Business HRA) went into effect January 1, 2017, giving small businesses the same tax advantages that big corporations enjoy when it comes to offering benefits to staff. Through this type of arrangement, small businesses can give their employees pre-tax dollars to pay for premiums and other medical expenses. Absolutely no salary reductions are used to pay for a small business HRA plan. These plans are not group insurances and aren’t subject to ACA coverage requirements, to income or employment taxes.
How a QSEHRA helps orthodontics practices
Typically, when companies choose traditional group insurance plans, they have to deal with shifting and unanticipated costs. However, when you choose a small business HRA plan, your monthly costs are fixed. An additional benefit is that you don’t have to deal with the administrative tasks and man hours it takes to set up a group plan with health insurers.
Studies have shown that companies who offer quality benefits have improved job satisfaction and company morale. Moreover, offering health insurance automatically makes you more competitive in the job market. By providing a small business HRA, employers are given the liberty to choose a health insurance plan that fits their own needs and still get reimbursed for a good portion of their premiums and other expenses. They can choose to be on their spouse’s plan, pick an insurer that is part of a provider’s plan they like, or stay on their current plan, eliminating the trouble it would take them to choose a new plan.
What items can be reimbursed?
Most medical, dental, and vision expenses are eligible to be reimbursed for employees and any spouses and/or dependents on their plan. To receive reimbursement, the individual must have been covered by health insurance at the time they incurred the expense.
Monthly premiums are reimbursed if they are for an individual medical, dental, or vision policy. However, copays, deductibles, and many other healthcare needs can be reimbursed regardless of association with a group or individual insurance policy. Prescriptions are eligible to be reimbursed and over-the-counter drugs purchased without a prescription can be reimbursed if included in the terms of the company’s small business HRA. Keep in mind that these reimbursements are taxable to the employee.
It is important to remember that all covered costs, including medical expenses and insurance premiums, must be documented to submit for reimbursement. Documentation can include bills from a physician’s office, explanation of benefits summary from insurance company, written documentation from your physician, etc…
What’s the financial benefit?
The capability to choose what amount you pay each month is a big financial benefit of small business HRAs. The 2020 annual maximum individual amount is $5,250 and the maximum refund for an employee with family costs is $10,600. A large advantage to your staff is that no salary reductions are used to pay for a plan and the fact that they get to pick the insurance plan they want outside of the company and choose their premium based on their personal budget. The monthly contribution is completely funded by the employer. It cannot be deducted from employees’ paychecks and they cannot be asked to contribute to it.
You must offer the same monthly reimbursement amount for all your employees, although it can vary based on certain criteria. A company can set up their small business HRA plan to allow employees to carry over their unused reimbursements from one plan year to the next. But, the sum of the carried over amount and the amount that is regularly available cannot exceed the dollar limit for the next year. You cannot cash out your unused reimbursements – you can only roll them over to the following year’s funds.
Who qualifies?
As a business, you qualify if you employ fewer than 50 employees and do not currently offer a group healthcare plan, you can participate in the small business HRA program.
Breaking it down further, any full-time staff (which the program defines as working at least 30 hours a week for at least 120 consecutive days) is eligible. Your seasonal or part-time employees do not qualify for a reimbursement.
If need be, the following individuals may be excluded from your small business HRA plan:
- Employees who have not completed 90 days of service
- Employees under age 25
- Part-time and seasonal employees
- Union employees (unless the union agreement provides for eligibility)
- Non-resident aliens without income from sources within the United States
Ready to get started?
Setting up a small business HRA is easy with Take Command Health. We have detailed directions for how to get started as well as a platform that simplifies onboarding, finances and tax time. Contact us through the link below to find out how we can help you provide your employees with straightforward and high-quality health insurance.
Hungry for more? The introduction chapter to our handy new QSEHRA Guide is a great place to start.
