Most Businesses offer a group health insurance plan for their employees. However, sometimes you may start working for a company that offers a health insurance stipend instead of a health plan. So, what is it? Great question, below you’ll find everything employees and employers need to know about this alternative employee benefit.
Stipend Benefits For Employees
What Is A Health Insurance Stipend?
A health insurance stipend is a set amount of money that your employer gives you to pay for individual health insurance. Typically, you receive this money in your paycheck. Think of it almost like a bonus in every paycheck. While your employer pays this extra money in hopes that you’ll use it for health insurance or other out-of-pocket medical costs, you don’t have to.
A health insurance stipend kind of sounds like an HRA doesn’t it? While both are employee benefits that go towards paying for your healthcare, they are entirely different. First, the way you receive the money is different. A stipend goes directly into your pay, while an HRA you receive a reimbursement after paying for your medical expenses. The biggest difference you’ll find is your stipend is taxable. Since it is added to your wages it works as taxable income. On the other hand, HRAs are tax-free. Another difference, as we noted above, is you can use the money however you see fit. With HRAs you can only use it towards qualifying health care expenses. With a health insurance stipend, you are free to use the money for anything from bills to savings, to buying out your amazon wishlist. Legally, your employer can’t ask you for proof that you used the money for health insurance. Who doesn’t love extra money with no strings?
The Benefits of a Health Insurance Stipend
Health insurance stipends give you a few advantages. For starters, this gives you tons of options for your health insurance. You’ll be able to pick and choose the best health insurance plan for you rather than depend on your employer’s group plan. Group plans tend to offer general basic coverage based on the needs of everyone overall. When you choose your own plan you can make sure it’s tailored specifically to what you need.
Additionally, if you receive an advanced premium tax credit your stipend won’t affect your eligibility. Advanced premium tax credits are a tax credit that you can get ahead of time to lower your health insurance premium. When you apply for health insurance through the Marketplace, you give an estimate of how much money you’ll make that year. Depending on that estimate, you may be eligible for the credit to use up front to lower your premiums. If you have group insurance through your employer you won’t be eligible for this credit.
Disadvantages of a Health Insurance Stipend
As with anything, there can be a few downsides with a stipend. Let’s say you don’t use the stipend for health insurance, instead you are covered under your spouse’s or parent’s plan. So, essentially your stipend is just extra wages and you use it for personal expenses. If your employer decides they want to switch to a group plan and no longer offer a stipend then this can seem like a pay cut. Now you’re making less than what you’ve become accustomed to. Depending on how much the stipend is, it could cause you some financial stress. Another downfall is, as we mentioned, the stipend is taxable. So with a stipend more money will be coming out of your check in taxes than it would if you didn’t have one.
Stipend Benefits For Employers
Pros Of Offering A Health Insurance Stipend
Offering a stipend can be a better option for several reasons. For one, it allows you to completely customize the benefits. There are no limitations or minimum contributions with a stipend. So, you can choose how much you pay. It can also be beneficial for small businesses who may not be able to afford to offer group insurance. The average group premium for individual health insurance is $7,911, and $22,643 for family. This way you can still offer a health benefit to your employees. Another benefit for employers is that stipends are easy to manage. It’s just a payroll addition, rather than having to manage a group plan or an HRA.
Cons Of Offering A Health Insurance Stipend
When you give your employees a stipend, they don’t have to use that money towards health insurance. You may hope they will but you can’t be sure since you legally can’t request proof of insurance. Not to mention, if your employee sees their stipend as part of their pay and you decide to stop offering it they might view it as a pay cut. Which in turn can lower morale altogether.
Types Of Health Care Stipends You Can Offer
You have two options here, you can give employees a monthly stipend to pay for all of their health care costs or divide “healthcare” into smaller more specific payments like:
Medical – This is for basic medical like doctor’s appointments, hospitalizations, preventative care, and health screenings.
Dental – For things like x-rays, cleanings, fillings etc.
Prescription drugs – This helps employees pay for any medications their doctor proscribes.
Mental health – Meant to pay for therapy, counseling, or psychiatric help.
You can also offer wellness stipends. Like health care stipends, wellness stipends are payments to help your employees focus on their physical and mental well being. However, wellness stipends are more geared towards a healthy lifestyle rather than medical health. These can be things such as:
Fitness – This can go towards gym memberships, fitness equipment, or personal trainers.
Nutrition – For things like meal delivery services, weight loss programs, or customized meal plans.
Alternative therapies – This could be anything from massages, to acupuncture, to chiropractic treatments.
Financial health – Your employees can get financial coaching or finance workshops.
FAQ
Will a stipend always be paid into my check?
For the most part yes, health insurance stipends are paid directly into your paycheck. However, instead of paying into your check your employer can also put the money into an expense card or a lifestyle spending account (LSA).
What are alternative options to health insurance stipends?
There are a few other ways an employer can opt to pay for health insurance for their employees aside from a group plan:
Health Reimbursement Arrangements (HRAs) – This is a tax-free alternative to a stipend. It lets employees tailor their healthcare package to their specific needs. HRAs require employees to pay for their own medical costs before they can file for a reimbursement. The downside is that many employees might not have access to the money they may need to pay for expensive bills. Making it difficult to pay for the services and wait for the reimbursement to process.
Health Savings Accounts (HSAs) – If a company offers a high deductible health plan for their group insurance they can also offer an HSA. Employees would choose how much of their check should go into their HSA. This lets employees set aside money before taxes to pay for health insurance.
Flexible Spending Accounts (FSAs) – An FSA works similarly to an HSA in that the employee can set aside money into the account before taxes to pay for healthcare costs. The difference is the HSA belongs to the employee. Meaning the money stays in the account even if they don’t use it and if they leave the company it goes with them. FSAs belong to the employer. So, if the employee doesn’t use it within the year they lose that money.
How much will the health insurance stipend be?
Unfortunately, there’s no direct answer for this. The company is completely in control of how much the stipend will be. There are no minimums or limits to how much an employer can offer. Ideally, the amount would be enough to cover health insurance premiums for an individual health plan.
Are there requirements for companies to offer health insurance stipends?
No, any company can choose to offer a health insurance stipend. Unlike with group plans where a certain percentage of employees need to opt in, or with HSAs where the company needs to offer a high deductible health plan first there are no requirements.
Need Help?
If your employer pays a health insurance stipend instead of a group plan then you have to enroll in your own health insurance plan. Shopping for health insurance can be time consuming and frustrating. The best way to find a cheap plan with the perfect level of coverage for you is to compare plans. That’s where EZ comes in. We’ll make the process faster and easier by letting you compare plans in your area in just a few minutes. Our licensed insurance agents work with all of the best insurance companies in the country. They can talk to you about your budget and need to help you choose the best plan. We compare plans and offer advice for free. To get your free instant quotes enter the zip code in the bar above, or call us at 877-670-3557 to speak with an agent directly.
Offering employees health benefits is important for businesses in all fields to do, but nonprofit organizations often struggle to provide healthcare. Research conducted in 2019 found that only 18% of nonprofit organizations offer group health insurance. Over 80% of these organizations said that they couldn’t afford group health insurance, while others said that they have employees with a wide variety of needs, and they had difficulty providing for all of them. If you run a nonprofit and want to offer health insurance but are unsure how you can manage it, you should know that traditional group health plans are not the only route you can go to provide your employees with health benefits.
Do You Have to Offer Health Benefits?
Offering group health insurance can help keep them happy, healthy, and productive.
In general, the choice to offer your employees health insurance is up to you. You should be aware, though, if you have 50 or more full-time employees, you do not have to offer health insurance, but you will be penalized for not offering some level of coverage. If you have fewer than 50 employees, then you are not required by the ACA to provide insurance, but there is an incentive for you to do so, which we will discuss later.
The main issue is that you really should offer healthcare to your employees, if at all possible. Offering health benefits is important because it helps keep your employees healthy and happy. Providing healthcare is beneficial for you, as well: studies show that offering health benefits is important for hiring and retaining top talent.
Nonprofit Health Benefits Options
Many small nonprofits simply do not have the resources to offer traditional group health insurance to their employees, but it does not mean they do not want to. It is a major challenge for most, but fortunately there are other ways to provide benefits:
SHOP Marketplace Group Plans
If you’re a small nonprofit with fewer than 50 employees, you can choose to offer a group health plan through the Small Business Health Options Program (SHOP). These affordable plans have four tiers of coverage, like individual ACA plans, and you have the ability to choose how much or how little you want to contribute to your employee’s premiums.
One of the best things about SHOP for smaller nonprofits? The tax advantages. You may be eligible for the Small Business Health Care Tax Credit if you have fewer than 25 full time employees, pay average annual wages to your employees of less than $50,000 per full time employee, and cover at least 50% of your full-time employees’ health insurance premium costs. You’ll be eligible for the minimum tax credit if you meet the above criteria; you’ll be eligible for the full tax credit if you have fewer than 10 employees who are paid less than $25,000 per year. The credit for tax-exempt nonprofits could be worth up to 35% of the cost of your contributions to your employees’ health insurance premiums.
HRA
A health reimbursement arrangement (HRA) is a way for employers to reimburse employees for medical expenses such as health insurance premiums and out-of-pocket expenses. The best part is that HRAs are tax-free! You can choose a certain tax-free monthly allowance to provide to your employees which rolls over each month. This will allow you to budget each month for employee health benefits, while giving your employees the option to choose the coverage that best suits their specific needs. There are 3 different kinds of HRAs:
Qualified Small Employer HRA (QSEHRA)– for employers with fewer than 50 full-time employees. These HRAs have a limit on the monthly amount you can offer. In addition, you cannot offer a group health plan alongside a QSEHRA.
Individual Coverage HRA (ICHRA)– for employers of all sizes, these HRAs can function as a stand-alone benefit or as a separate option in an organization’s health benefits program, alongside group health insurance.
Group Coverage HRA (GCHRA)– employer-funded medical reimbursement plan linked with a group health insurance plan, usually a high-deductible plan.
How EZ Can Help
Depending on the size of your nonprofit, you might have different options for offering health benefits. EZ.Insure works with businesses and organizations of all sizes and types, and understands that each business has different needs. We work with the top-rated insurance companies around the country and can compare plans in your area and help guide you to the best option for your nonprofit organization. Because we care about helping others and not making a profit off them, we offer our services for free. To get free instant quotes, simply enter your zip code in the bar above, or to speak directly with one of our licensed agents, call 888-998-2027.
One of the best ways to attract and retain the best employees is to offer competitive benefits. These benefits can come in many forms and are an important part of any employee’s compensation package. One of the most important benefits to most employees is health insurance; in fact, 56% of employees would prefer a healthcare plan to a raise! When you offer employees benefits such as health insurance, they are not only healthier, but happier. And what comes of happy employees? Higher productivity that helps boost your bottom line! So take a look at your budget, and see if you can consider offering one (or more) of these common employee benefits.
How to Structure Your Benefits Plan
You have 2 choices when it comes to offering health benefits to your employees.
Generally businesses utilize two different structures when it comes to offering employee benefits:
Organizational-oriented benefits: Employers offer employees specific or defined benefits, such as traditional health insurance, a pension or other retirement plan, or wellness program. These benefits are employer-owned and employer-selected.
Consumer-oriented benefits: Employers offer employees employer-funded dollars to purchase their own benefits. When it comes to healthcare, this can be something like a QSEHRA or ICHRA, both of which would allow you to reimburse your employees for wellness and medical expenses.
Health Insurance
Health insurance is a must for many people when they’re looking for a job, and also the reason that many employees choose to stay in a job. In fact, research shows that 78% of employees are more likely to stay with an employer if they are offered health insurance. Many employees are interested in traditional healthcare plans, because they provide the most comprehensive benefits for them and their families.
If you choose not to offer a traditional health insurance policy, you do have other options, but not offering any kind of healthcare plan can end up costing you. Losing even one employee can cost you 50-400% of their annual salary. If you are unsure whether you can afford a group health plan, remember that there are a variety of group health insurance plans to choose from, and many are more affordable than you might think. This is especially true when you consider how important this benefit is to employee retention! To find out what plan is right for you, speak with an EZ agent.
In addition to offering a healthcare plan to your employees, you can also choose to offer a FSA or HSA. Both of these types of accounts allow employees to put tax-free money aside for qualified medical expenses, but they have a few differences. FSAs work with nearly any health insurance plan, but if your employee does not use the money by the end of the year, then they will lose it. With a HSA, the money employees put aside will continue to roll over for as long as they have the account. Unlike FSAs, though, HSAs must be paired with a High Deductible Health Plan.
Dental & Vision
You can also choose to offer your employees dental and vision care. Dental and vision coverage is cheaper than health insurance and so is much more affordable to offer. Employees with families or those who have issues with their vision will find these benefits especially important.
A retirement savings plan, or 401(k) plan, is a great way to help your employees save towards their retirement. You can offer a certain amount to match their contributions. For example, many companies offer up to a 4% match to what their employees contribute to the plan.
Paid Time Off
This is a great benefit to offer your employees. Being able to go on vacation and get paid for it is great for your employees’ morale. In addition, being able to call in sick and not have to worry about losing a day of pay is essential for many, especially employees with families.
Short term disability offers employees their pay until they can return to work.
Short-Term Disability
Offering short-term disability means that employees will continue to get paid if they cannot work after experiencing an injury or illness. Employers continue to pay a percentage of employee’s income until they are able to come back to work.
These programs have grown in popularity over the years. Wellness programs help employees get healthier by providing benefits such as gym membership stipends. These programs don’t need to focus solely on physical health: according to one study, 73% of employers have mental wellness programs for their employees.
When it comes to choosing which benefits to offer your employees, you can’t go wrong with health insurance. If you are looking for a group health plan, there are some things to consider, such as making sure you are following state regulations, and that you are getting the most benefits for the best price. EZ.Insure agents can check all these boxes and more, because we work with the top-rated health insurance companies in the nation. We will compare plans in your area and find a plan that fits your budget, and makes your employees happy. To get free instant quotes, simply enter your zip code in the bar above, or to speak to an agent, call 888-998-2027.
