As health insurance costs continue to climb, small nonprofits in Ohio are struggling to offer affordable coverage for their employees. With limited options and rising premiums, it’s more important than ever for nonprofit administrators to explore alternative solutions like ICHRA, which can offer greater flexibility and control over health insurance benefits.
The Health Insurance Challenge for Small Nonprofits
In Ohio, nearly 60,000 nonprofits employ 564,000 people, accounting for 12% of the state’s workforce. However, about 80% of these nonprofits employ fewer than 25 people, making it difficult to offer competitive health insurance plans. The rising costs of health premiums have made it harder for small organizations to provide health benefits, with many nonprofits either cutting contributions or eliminating coverage altogether.
Common Health Insurance Options for Small Ohio Nonprofits
Ohio’s smaller nonprofits often face a tough choice when selecting health insurance plans for their teams. Several options are available, but each comes with its own set of advantages and drawbacks. Here’s a breakdown of the most common choices:
1. ICHRA (Individual Coverage Health Reimbursement Arrangement)
A newer health benefit option, ICHRA allows employers to give their employees a pre-tax allowance to purchase their own health insurance from the marketplace. This model offers flexibility for both employers and employees, making it an attractive choice for smaller nonprofits.
Advantages:
- Cost Control: Employers set a fixed monthly contribution, which helps manage the budget.
- Employee Choice: Employees can choose a plan that suits their individual needs, rather than being forced into a one-size-fits-all group plan.
- Tax Advantage: Since the contributions are pre-tax, they go further than offering extra cash in employees’ paychecks.
- Quick Setup: Setting up an ICHRA plan is quick and easy, with enrollment taking as little as 10 minutes.
Disadvantages:
- Complexity for Employees: While the ICHRA model offers flexibility, some employees may need guidance in navigating the marketplace to choose the best plan.
2. Fully-Insured Group Health Plans
Fully-insured group health plans have long been a staple for small businesses, including nonprofits. In this model, the nonprofit collaborates with a broker to choose a group plan and pays a fixed premium to the insurer, who handles claims.
Advantages:
- Predictable Premiums: Businesses know exactly what they will pay each month.
- Comprehensive Coverage: Fully-insured plans are state-regulated, ensuring that all employees receive a minimum level of coverage.
Disadvantages:
- High Premiums: Fully-insured plans are typically the most expensive option.
- Limited Flexibility: Many small nonprofits only have one plan to offer, making it difficult to cater to varying employee needs.
- Participation Requirements: Plans often require 60-70% of employees to sign up, which can be difficult for small teams.
- High Contribution Requirements: Employers may need to contribute 50% or more of the premiums, which can be financially challenging.
3. Level-Funded Health Plans
Level-funded health plans combine elements of both fully-insured and self-insured plans. Part of the premium is set aside in a claims fund, which is used to pay out employee medical claims. If claims are low, the employer can receive a refund, but if claims exceed the fund, premiums may rise.
Advantages:
- Potential Refunds: If claims are low, the employer may receive some of the premium money back.
- Lower Premiums for Healthy Employees: Employers with healthier employees may find this plan more affordable than a fully-insured one.
Disadvantages:
- Unpredictable Costs: If claims are higher than expected, the employer could face significant premium increases.
- Participation Requirements: Like fully-insured plans, these plans often require a minimum participation rate and employer contribution.
- Less Flexibility: Plans may not be as customizable for the specific needs of the nonprofit.
4. Self-Funded Group Health Plans via COSE
COSE (Council of Smaller Enterprises) offers a self-funded health plan option for small employers through a mechanism called MEWA (Multiple Employer Welfare Arrangement). This plan pools premiums from similar small employers to create a self-funded health insurance option.
Advantages:
- Lower Premiums for Healthy Employees: If your employees are healthy, premiums can be lower than traditional fully-insured plans.
- Potential for Refunds: Like level-funded plans, there’s the possibility of refunds if claims are low.
Disadvantages:
- Health Risks: If employees have high medical claims, premiums could increase significantly.
- High Participation Requirements: This option also requires a high participation rate and employer contribution.
- Limited Flexibility: In Ohio, the self-funded plan is exclusively provided by Medical Mutual, limiting choice.
5. Offering Extra Cash in Paychecks
Some nonprofits may decide that offering additional cash in paychecks is the simplest way to provide a health benefit. This option is often used when other plans are unaffordable or unavailable.
Advantages:
- Simplicity: The nonprofit only needs to add extra money to employees’ paychecks.
- Predictable Costs: The amount given is fixed and known in advance.
Disadvantages:
- Limited Value: Employees may not realize the extra cash is intended for health insurance.
- Tax Burden: The additional money is taxed, reducing its overall value.
- No Guarantee of Health Coverage: Employees may not use the extra money for health insurance, which defeats the purpose of providing the benefit.
Comparing Small Group vs. Individual Marketplace Insurance in Ohio
Surprisingly, small group fully-insured health plans can cost up to 70% more than individual plans available on the Ohio health insurance marketplace. In some cases, the price difference can be even higher.
For instance:
- In Columbus, Ohio, small group plans cost about 120% more than individual plans on the marketplace.
- In Cleveland, the difference is around 50%.
- In Cincinnati, small group plans are about 125% more expensive.
Given these disparities, many nonprofits may find it more affordable to shop for individual plans on the marketplace rather than opting for a traditional group plan.
Conclusion
As small nonprofits in Ohio continue to face rising health insurance costs, it’s crucial to explore alternatives like ICHRA, which provide greater flexibility and cost control. With health premiums increasing and options shrinking, nonprofits need to make informed decisions that align with their budgets and the needs of their employees.
