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Many small businesses in Colorado are not aware of a new way to offer health benefits called an Individual Coverage Health Reimbursement Account. An I.C.H.R.A. can save businesses significant capital while providing their employees with affordable health insurance. The best way to understand how an ICHRA works is to meet Sam.
ICHRA stands for "Individual Coverage Health Reimbursement Arrangement."
Sam is a Colorado based small business owner who is having trouble attracting high quality employee candidates because he does not offer health benefits. It’s a catch 22 for Sam because he cannot afford to pay the high cost of employee health insurance premiums without sacrificing his companies profitability. Now, some of Sam’s employees don’t want health insurance because they are on a spouse’s group plan, or their income is low enough to receive a premium discount on a Connect for Health Colorado individual plan. However, other employees, that have no other affordable options for health insurance are paying full price and that hurts them financially.
Let’s take Andrea for example. Andrea is one of Sam’s top employees and she is extremely valuable to his small business. She is paid well for her position, but she is approaching 50 years old and her monthly health insurance premiums are now over $500 a month on her individual plan. Between paying full price for her health insurance premiums and paying her plans deductible last year for an expensive outpatient surgery, she ended up with over 10K in medical costs just for herself, not including her family. Andrea loves working for Sam but wishes Sam offered health insurance benefits. She’s thought very seriously about hiring on with another company that does. This leaves both Sam and Andrea in an undesirable situation.
So, Sam searched online for "small business health insurance Colorado." Through the expert guidance of a licensed agent from our company, he found out that in 2020 the ICHRA was re-introduced as an employee health insurance option for small businesses. He learned that it is a low-cost option that helps business owners because it allows businesses to control the specific dollar amount that is contributed toward each employee’s monthly premium. So, Sam started thinking, he knew he could afford somewhere between $100 to $150 dollars per employee each month. He was also confident that approximately half of his ten employees would opt out. This would allow Sam to offer health insurance benefits to his employees at a monthly cost of somewhere between $500 & $750 dollars per month. Sam was excited, this would save him a small fortune in premium costs compared to other health insurance quotes he had gotten in the past!
The only question remaining for Sam was whether this modest monthly investment would really help his small business attract and keep top talent, like Andrea.
Sam and Andrea sat down with their new employee health insurance agent and did some simple math. Obviously, they knew that an ICHRA at a $100-dollar monthly employer contribution would reduce Andrea’s monthly premium from roughly $500 to $400 dollars. Andrea thought that was alright, because some savings is better than none.
Then she learned that she could pay the remainder of her monthly premium with pre-tax dollars from her paycheck. Andrea grabbed a calculator, forty percent of $400 is $160 dollars. She smiled; her monthly premium would go from $500 to $240 dollars per month. Andrea was looking at a savings of over 50% each month!
Andrea learned she had the option to add her husband and other household members and get that same 40% pre-tax advantage on their premium costs. Not only that but Andrea would be able to choose any individual health plan available in their area, giving her multiple providers and dozens of plans to choose from. Andrea was happy…
Sam was excited because his business would now be more secure and attractive to top tier talent. Sam was also happy that he could manage the entire process with an easy and simple to use online software with full support from his new health insurance agent!
If you would like to see how an I.C.H.R.A. could lower your Colorado small business health insurance costs, please reach out to Benefits 4Business. (970) 578-0212
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