For many small nonprofits, the Affordable Care Act ("Obamacare") feels like a moving target. However, for employers with fewer than 50 employees, the options for health insurance are clearer.
Small nonprofits have five main options for health insurance:
Individual Health Insurance (with or without premium reimbursement)
Private Small Group Plan
The first option is a relatively simple approach, yet it achieves results: direct employees to the individual health insurance Marketplace in the state where they reside to purchase individual health insurance. Eligible employees can access discounts on their premiums via the individual health insurance tax credits.
If the nonprofit would like to contribute to employee's premium expenses, they can set up a formal health plan (a “premium reimbursement plan”) to reimburse employees for the unsubsidized portion of their premium. And, premium reimbursement allowances can be set based on job description (e.g. $400/month to managers and $200/month to entry-level case workers).
For many small nonprofits, this is the most cost-effective solution because the organization can contribute any amount they desire and individual health insurance costs are, on average, less than small group plans.
The ideal nonprofit for this solution is a small organization who is priced out of group health insurance, wants to offer health benefits for the first time, or who doesn't want the administrative hassle of a group health insurance plan.
The SHOP Marketplaces are new state- or federally-run exchanges for small employers. Small group health plans are available on the Marketplaces and could be a good coverage option for employers with 50 or fewer employees, if they can meet certain requirements. For example, in Massachusetts employers participating in the SHOP must contribute at least 50% of the premium amount, employers with 1-5 employees must have 100% of the employees enrolled, and employers with 6-50 employees must have at least 75% enrolled.
For eligible small nonprofits, the SHOP Marketplace gives access to the small business tax credits.
With a private exchange the nonprofit gives employees a set contribution to use towards a menu of plan options. The plan options can be individual- or group-based. Private exchanges are a type of “defined contribution” strategy.
Joining a co-op for health insurance is a more traditional approach for small businesses. The co-op exists to increase buying power and spread the risk among a larger group. Each co-op is structured differently, so the co-op may offer better insurance rates than a group policy or SHOP depending on regional insurance underwriting laws and the co-op itself.
Purchasing a private small group plan is also an option for small nonprofits. Nonprofits may find more options and carriers to choose from on the private market as compared to the SHOP, where some states only have one or two plans to choose from.
For many small nonprofits, traditional group health insurance is unattainable, or undesirable. Individual health insurance with premium reimbursement or private exchanges paired with individual health insurance are the future of small business health insurance -- and are often the best options for small nonprofit organizations.