Health Insurance for Small Nonprofit Organizations: A Comprehensive Overview

Health insurance for small nonprofit organizations can be a complex and overwhelming topic. According to the National Association of Nonprofit Organizations & Executives, over 70% of nonprofits have fewer than 10 employees, making it even more challenging to find affordable health insurance options.

Nonprofit organizations can explore various health insurance options, including group plans, individual plans, and association health plans. A group plan can provide coverage for employees, while an individual plan can offer coverage for the organization's leaders or board members.

The Affordable Care Act (ACA) requires nonprofit organizations with 50 or more full-time employees to offer health insurance to their employees. However, for nonprofits with fewer than 50 employees, the ACA provides tax credits and other incentives to encourage them to offer health insurance.

Nonprofit organizations can also consider purchasing health insurance through a professional association or a business organization that offers group health insurance plans.

Small nonprofits have a range of health insurance options to consider. For organizations with less than 50 full-time equivalent employees, a Qualified Small Employer HRA (QSEHRA) is a suitable choice.

QSEHRAs provide nonprofits with predictable and controlled costs, allowing them to determine their own annual budget for health benefits. This is especially crucial for smaller organizations operating on limited budgets.

One of the key benefits of QSEHRAs is their simplicity and ease of management. With fewer customization options and regulations, the administrative burden for small nonprofits is significantly reduced.

QSEHRAs also offer tax benefits, allowing nonprofits to deduct their contributions from their taxes and reduce their overall tax liability. Employees receive these reimbursements tax-free, maximizing the value of their health benefits.

In addition to QSEHRAs, small nonprofits can also consider partnering with a company like Take Command to streamline the process of implementing and managing a QSEHRA. This can simplify compliance, setup, and ongoing management.

Here are some key details about QSEHRAs:

Nonprofits with two or more employees who are not related may also consider group health insurance plans. A health insurance broker can identify plan options and provide comparative analysis to help nonprofits make an informed decision.

For organizations with 5 or more employees, Professional Employer Organizations (PEOs) like Trinet can offer HR solutions, including affordable insurance. Members of Washington Nonprofits can save 25% on TriNet services.

HRAs, including ICHRAs, offer cost control and tax advantages, making them a great option for nonprofits with diverse employee classes and varying healthcare needs.

One of the main benefits of HRAs is their flexibility, allowing nonprofits to customize their benefits approach to meet the unique needs of their employees.

Nonprofits that prioritize community and simplicity may find Sharing Ministries to be a viable option, providing broader coverage for employees who share a common faith.

However, it's essential to evaluate the potential limitations of each option, such as the administrative burden of HRAs or the potential for limited provider networks with Sharing Ministries.

Ultimately, nonprofits must carefully consider their specific needs, values, and preferences when selecting a health benefits plan.

Here are the key benefits and challenges of HRAs and Sharing Ministries to consider:

Consider the size of your nonprofit organization. Smaller organizations may find traditional group health plans more manageable, while larger organizations can take advantage of the flexibility offered by HRAs, such as ICHRAs or QSEHRAs.

Carefully analyze the costs associated with each health benefits plan, including premiums, contributions, and potential out-of-pocket expenses for both the nonprofit and employees. Consider the long-term financial sustainability and alignment with your nonprofit's mission.

Assess your employees' preferences and needs regarding healthcare coverage. Consider their desire for choice, flexibility, and the value they place on comprehensive coverage versus cost-sharing.

Evaluate the administrative requirements and compliance responsibilities associated with each plan. Assess your organization's capacity to handle the necessary paperwork, reporting, and legal obligations.

Here are some key factors to consider when choosing a health benefits plan:

Seek expert guidance from benefits advisors, insurance brokers, or HR professionals who specialize in nonprofit health benefits. Their expertise can provide valuable insights and help navigate the complexities of different plan options.

By carefully considering these factors and following these guidelines, nonprofits can choose the health benefits plan that best suits their organization's size, financial capacity, and the specific needs of their employees.

Health insurance for small nonprofit organizations can be a challenge, but there are options available that can help bridge the gap.

One option is Health Reimbursement Arrangements (HRAs), which allow nonprofits to control costs by setting a fixed contribution amount. This can be a cost-effective alternative to traditional group health plans, which often come with higher premiums.

HRAs also offer more flexibility in benefit design, allowing nonprofits to tailor reimbursement amounts and eligible expenses to better meet the unique needs of their employees.

For smaller organizations, traditional group health plans may be more manageable, but larger organizations can take advantage of the flexibility offered by HRAs, such as Individual Coverage HRAs (ICHRAs) or Qualified Small Employer HRAs (QSEHRAs).

HRAs provide tax advantages for both nonprofits and employees, with reimbursements typically being tax-deductible for the organization and tax-free for employees.

Here are some key features of HRAs:

Another option for nonprofits is Sharing Ministries, which can be a viable option for organizations that prioritize community, simplicity, and broader coverage.

However, understanding the specific needs, values, and preferences of your nonprofit is essential in selecting the most beneficial health benefits plan.

To choose the right plan, consider factors such as the size of your organization, financial capacity, and the specific needs of your employees.

To be eligible for health insurance benefits, your small nonprofit organization must meet specific requirements. You must be a "small employer" in the eyes of the IRS, meaning you have 50 or fewer full-time employees.

To qualify for tax-free reimbursements, employees must have individual health insurance coverage that meets Minimum Essential Coverage (MEC) requirements. They must also submit claims for reimbursement to prove their expenses meet QSEHRA requirements.

If your nonprofit has 50 or more full-time equivalent employees, you must offer affordable health coverage that meets MEC to at least 95% of your full-time employees and their dependents. However, if you have fewer than 50 employees, you don't have to offer health insurance benefits, but providing health benefits can promote employee retention and overall company health.

Here are the eligibility requirements for QSEHRA:

Organizations are not required to offer benefits, but there are some exceptions. Nonprofits, for instance, are not mandated to provide employee benefits, such as health insurance, by federal law.

State laws and regulations may vary, so nonprofits should consult local regulations to ensure compliance. This means that nonprofits should check their local laws to see if they are required to offer benefits.

Nonprofits with 50 or more full-time equivalent employees (FTEs) must offer affordable health coverage that meets minimum essential coverage (MEC) to at least 95% of their full-time employees and their dependents. This is known as an applicable large employer (ALE).

Companies with fewer than 50 FTEs don't have to offer health insurance benefits to their employees, nor are they subject to the penalty if they don't provide them.

QSEHRA rules are specific and must be followed to ensure tax-free reimbursement for employees. The business owns the HRA, not the employee, and only the company can put money into the HRA.

HRA funds do not earn interest, and the business determines the amount contributed to the HRA. Employees can use QSEHRA money to pay for personal and family medical expenses.

The rules for reimbursement from a QSEHRA are found in IRS Publication 502. Any unused money stays with the business, and rollover of funds for employees with a QSEHRA is not guaranteed.

Nonprofits can offer a QSEHRA, which is an IRS-approved, employer-funded health benefit. This benefit allows employers to reimburse their employees tax-free for qualifying medical expenses, including health insurance premiums up to an employer-defined monthly allowance amount.

QSEHRAs have maximum contribution limits set by the IRS each year. These limits determine the maximum amount employers can contribute to the QSEHRA.

The flexibility and budget-friendly aspects of QSEHRAs make them desirable to nonprofits. In fact, 56% of nonprofits offer a QSEHRA because they couldn't afford traditional group health insurance, and 25% chose a QSEHRA because they needed a more flexible benefit.

Businesses with fewer than 50 FTEs don't have to offer health insurance benefits to their employees. However, they can still provide health benefits to employees through a QSEHRA.

To qualify for a Qualified Small Employer HRA (QSEHRA), a small business or non-profit must meet two key requirements. The employer must have 50 or fewer full-time employees, which is the IRS's definition of a small employer.

To be eligible for QSEHRA tax-free reimbursements, employees must have individual health insurance coverage that provides Minimum Essential Coverage (MEC) as defined by the IRS in Section 106(g). This means they must have a plan that meets the IRS's standards.

Employees must also submit claims for reimbursement to prove their expenses meet the QSEHRA requirements for qualified health expenses. This can be a bit of a process, but it's essential for getting reimbursed.

Here are the QSEHRA requirements for employers and employees in a nutshell:

To become a licensed CO-OP, you'll need to meet the same state requirements as other health insurance issuers. This involves working with the relevant state departments of insurance or licensing agencies to achieve licensure.

CO-OPs must comply with exchange rules, just like other health insurers. This ensures that they operate fairly and provide quality services to their members.

To be eligible for CO-OP loans, organizations must meet certain criteria. Specifically, they cannot be sponsored by pre-existing issuers, holding companies that control pre-existing issuers, or foundations established by pre-existing issuers.

If an organization receives 25% or more of its total funding from pre-existing issuers and their agents, it's ineligible for the CO-OP program. This helps prevent undue influence from existing health insurance companies.

CO-OPs can receive grants and other funding from state or local governments, but only if they meet certain conditions. The CO-OP or its sponsor cannot be controlled by a governmental entity, and the CO-OP cannot receive more than 40% of its total funding from a state or local government.

Here are the key facts to keep in mind:

For a single employee, nonprofits often choose to reimburse or pay for their individual health plan. This can be a good option, but the employee may need to supplement the stipend to cover the full cost.

One alternative is to use a payroll and benefits platform like Gusto, which offers HR services with no minimum number of employees. They provide consultation with a broker regarding health plan options or administration of health insurance reimbursement for employees.

Gusto's services come with administrative fees starting at about $45 per month, plus $6 per person per month. They also offer a variety of other services, but it's worth noting that they don't currently offer nonprofit discounts.

Nonprofits can also find individual plans on the open exchange, such as the Washington Healthplan Finder. This is a good resource to explore, especially since special enrollment has been extended through August 15, 2021.

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.

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. 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.

Here are some options for group health insurance plans for small nonprofits: