Health insurance companies may look at nonprofit organizations as “smaller players.” That doesn’t mean they don’t provide the same type of health insurance for nonprofits. Small nonprofits are often responsible for the same premiums as big businesses.

Since most employers provide health insurance for their employees and their families, small nonprofits can qualify for employer-provided benefits.

Nonprofits provide goods and services to communities and consumers in need without profit from their endeavors. Unfortunately, because they’re not driven by profit, many organizations can find it hard to receive high-quality health insurance like they would through government programs such as Medicaid or Medicare.

What Is Health Insurance?

Health Insurance is a form of insurance coverage that pays for medical and surgical expenses. It is purchased by individuals, families, or businesses (on behalf of their employees).

It can take several forms:

  • Health coverage provided through an employer.
  • Health coverage bought directly from an insurer.
  • Hybrid plans that combine features of each.

Do Nonprofit Organizations Need Health Insurance?

Yes, they do! Nonprofit organizations exist to help and support others, and they must have all their bases covered to run a successful nonprofit. One of these things is health insurance. Although nonprofits aren’t taxable like businesses are, they still need to take care of themselves and keep employees healthy.

What Health Insurance Do Nonprofits Need?

Most nonprofits need Directors and Officer (D&O) Insurance and General Liability Insurance. In addition, if the company has three or more workers, there may be additional requirements for employees’ compensation insurance and other offers such as dental, life, and health insurance.

In addition, nonprofit organizations face different risks than commercial enterprises and must deal with unique requirements to remain tax-exempt.

The first step in choosing nonprofit health insurance is determining your needs. This requires some research into your organization’s goals and resources and an understanding of how different plans work.

Health care costs vary significantly from one state to another and between localities within each state. Therefore, the recommended health insurance to meet the needs of most nonprofits is the “Health Reimbursement Arrangement.”

What Is a Health Reimbursement Arrangement (HRA)?

HRAs are a type of employer-funded health insurance plan. They allow employers to reimburse employees (or their dependents) for eligible medical expenses pre-tax. This means employees don’t have to pay income taxes on their HRA benefits, which lowers their overall health care costs and out-of-pocket expenses.

If certain conditions are met, employers also enjoy tax benefits for contributing to an employee’s HRA account. Employers can deduct HRA contributions from their taxable income, making it easy to cover these costs while keeping expenses down in other areas.

Individual Coverage HRA

Individual Coverage HRA is an alternative to traditional group health plans. This specific health plan allows employers to provide stipulated non-taxable reimbursements to employees for medical expenses and out-of-pocket costs such as deductibles and copayments.

Nonprofits or other organizations that receive tax-exempt status from their state may be able to set up a Health Reimbursement Arrangement (HRA) with a third-party administrator.

These are in use primarily for employee health benefits and let employers reimburse employees who purchase individual coverage through an HSA. However, all these plans must meet IRS guidelines, limiting flexibility in structuring them.

Group Coverage HRA

Group Coverage HRA is a reimbursement arrangement where an employer pays an employee out-of-pocket costs not covered in a group health insurance plan.

This type of reimbursement arrangement offers an efficient, non-taxable way to pay your employees’ medical and dental expenses on a pre-tax basis. It means reimbursement with pre-tax payments, so they save money at tax time.

Employers can also use HRAs to reimburse their workers for medical insurance premiums under certain circumstances; you may also be able to cover these premiums if you operate as a corporation.

Qualified Small Employer HRA

Nonprofits may get tax advantages when providing health insurance coverage as part of a cafeteria plan. Nonprofits with fewer than 25 full-time equivalent employees that qualify as small employers can set up what’s known as a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). 

These plans allow small businesses to pay all or a portion of their employees’ health premiums pre-tax. In addition, nonprofits can use them to reimburse employees enrolled in qualifying high-deductible health plans—and they’re subject to fewer restrictions than health savings accounts (HSAs) and Archer MSAs.

Why Are HRAs a Good Choice for Nonprofit Organizations?

HRAs can be an excellent choice for nonprofit organizations. They allow employees to purchase health insurance independently rather than having their employer choose coverage. In addition, employees stand the chance of receiving tax-free reimbursements for their out-of-pocket care expenses.

It gives nonprofit workers the freedom to decide what type of care they prefer and how much they are willing to spend out of pocket.

They can also take advantage of discounts offered by HRA providers if they find lower prices elsewhere. Plus, contributions made by nonprofits are tax-deductible. This gives them an extra incentive to join an HRA over an insurance plan offered by their employer.

What Is the Cost of Health Insurance for Nonprofits?

On average, employers pay 80% of health insurance for single coverage. Most standard companies provide a health insurance policy that sums up to $7,470 per year and pays up to 80% of the premium per year. Employees cover the remaining 20%

The cost of health insurance can vary based on your organization’s size, location, and other factors. Fortunately, many nonprofits qualify for an exemption from covering employees under the Affordable Care Act (ACA).

If you’re a nonprofit and wonder how much you’ll be paying in healthcare costs next year, it helps to break down what an average company pays compared to yours. Large organizations typically have lower health care costs than small organizations because they tend to buy plans with more actuarial value.

The actuarial value measures how much money employers put into their plans; bigger employers with more resources contribute more significant amounts, which typically means better coverage options are available.

Do You Need Health Insurance?

Do you need health insurance as a nonprofit? It’s not an easy question to answer, but it is necessary. Our professionals at Charles Newman Co. will help research the best coverage for your employees, how to get it, and how much it will cost.

Once that’s done, Our Insurance agents will ensure you’re not overpaying for your nonprofit health care plans. To get started, you can request information using our online Contact Form or phone our Peekskill office at (914) 690-7516. Our insurance specialists are eager to help.