How QSEHRA changes the benefits game for health startups
As a healthcare startup, you know as well as anyone that the healthcare industry could stand for improvement. The rising costs, shifting policy changes, lack of awareness on the part of consumers, and lack of transparency on the part of carriers and providers leave a lot of room for improvement. That’s why the work startups are doing in the healthcare realm is so critically important.
But as you know, startup life isn’t as glamorous as it sounds when you take into account how the many hats you wear, the growing pains, uncertainty when it comes to funding, and the constant battle to make a profit. Successful startups continue to try the latest tools and strategies to help them do their job more efficiently.
One relatively new tool that’s designed as any great startup should be: it’s lean, it’s flexible, it’s tax-advantaged, it’s budget-friendly. It’s called a QSEHRA and its designed to help startups and small businesses with less than 50 employees enjoy the same tax benefits as larger corporations, thanks to recent bipartisan legislation called the 21st Century Cures Act. It’s not surprising so many innovative startups are jumping on board with the QSEHRA.
The downside? Not very many people know about the QSEHRA and its perks.
A Health Wildcatters resident, Take Command Health, is trying to change that. The Dallas-based startup is trying to shake things up in the health insurance industry, and one of their most successful strategies is using their QSEHRA administration platform to help other small businesses roll out company-wide benefit plans that work with their budget. The result is that startups and small businesses can now get the same favorable tax treatment as a big company group plan with a lot less hassle.
What’s so great about a QSEHRA for startups?
- It’s smart. A QSEHRA uses tax benefits to help small businesses. Contributions to QSEHRA are tax-free. That means you aren’t paying payroll tax and your employees aren’t paying income tax. We call it a win-win.
- Boosts retention. Wondering what the number one factor is for millennials and job seekers considering a new job? You guessed it—health insurance benefits. Without a competitive benefits package, the best and brightest might choose to go elsewhere. Another perk for employees is that they can choose the best plan for them instead of being looped into a group plan that might not cover their doctors, their prescriptions, or their health needs.
- Saves time. Selecting and administering a group plan takes a lot of time and effort. As a startup, you’ve got better things to do. Choosing the right QSEHRA administration platform will save you time down the road as well. Take Command Health’s QSEHRA platform onboards employees, generates plan documents, ensures that you remain compliant, and makes tax time a breeze.
- Saves your budget. These costs are predictable. Unlike a group plan that might creep up in costs year over year, you control the amount contributed to a QSEHRA. It’s on your terms and within your budget. Wondering what happens to the leftover funds if they aren’t used? It stays with the business and doesn’t roll over. That means you aren’t responsible for funding a bunch of accounts; you only pay out when an employee submits an expense for reimbursement. Sweet deal!
- It’s flexible. You can design your QSEHRA to fit your needs. Want to just reimburse for premiums? Great. Want to add qualified medical expenses to the deal? Even better. Want to scale the contributions based on age, status, or family size? You can do that too (as long as it’s fair!).
How much can a startup save?
Here's an example of a startup with five full-time and two part-time employees. The designated reimbursement rates for these employees totals $2,300 per month. Without offering an HRA, around $460 would be taken out of the employees' paychecks for that same amount for income tax (~20%), a ~15% payroll tax would take another $345 each month from the employer's pockets, and no benefits are offered. With an HRA, no income taxes or payroll taxes are paid on the reimbursed amount. The only cost is the HRA fee of $20 per person, costing the employer $140 a month. The result? Approximately $665 per month in tax savings with better benefits. Not bad, huh?