Only 18% of nonprofits offer group health insurance: report

Small nonprofits historically have barriers to employee healthcare and are eager for the government to create more policies that ensure their staff has coverage, a new study shows.

In a recent report from PeopleKeep, only 18% of nonprofits have offered a group health insurance policy. According to the Nonprofits on Benefits: 2019 Report, out of 100 nonprofits, more than 80% can’t afford group health insurance, and another 52% say their employees have diverse needs, making a group health insurance offering difficult.

As a result, many nonprofits turn to the qualified small employer health reimbursement arrangement (QSEHRA), which allows them to reimburse employees, tax-free, for medical expenses. In fact, 93% of nonprofits using such an arrangement would recommend it to other nonprofits. Still, 68% of those surveyed want action from the government to expand health options.

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Created in 2016, these arrangements are a health benefit that allows groups with fewer than 50 full-time employees to reimburse workers for medical expenses. In 2018, nonprofits offered an average allowance amount of $311 for single employees and $473 for employees with a family. For many nonprofits, the ability to set fixed allowance amounts was their top reason for using these benefits (80%), followed by diverse employee situations (52%).

“We weren’t surprised to see an appetite among nonprofits for additional health benefit options,” Caitlin Bronson, content marketing manager at PeopleKeep and lead researcher on the study, told FierceHealthcare. “The QSEHRA is a great benefit that many are happy with, but it’s essentially the only name in the game when it comes to reimbursement-based health benefits for multiple full-time employees. More than anything, nonprofits (and other small businesses) would like a strong set of options so they can choose the approach that best fits their group.”

Bronson says an alternative like the individual coverage health reimbursement arrangement (ICHRA), which was proposed by the federal government last October, could help if an employee qualifies for a premium tax credit. Today, the QSEHRA requires that the employee reduce their credit dollar-for-dollar by their monthly QSEHRA allowance. But the ICHRA approach allows employees who qualify for premium tax credits to waive the HRA and collect the credit instead. 

“Nonprofits typically have quite a few employees who qualify for premium tax credits, so this may be an appealing option for them,” she added.

However, the ICHRA would only be available to employees who are covered by individual health insurance, while the QSEHRA can cover employees who have group health insurance through a spouse.

When it comes to "Medicare for All," one-third of survey respondents support the policy and 26% oppose it. Art organizations and social welfare groups were most in favor of Medicare for All, and religious organizations were least supportive, with only 15% supporting such an approach.

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Beyond Medicare for All, other suggestions for improving the healthcare system included more control over prescription drug costs and more HRA options.

Bronson notes that one glaring difference between the social welfare nonprofit respondents (who were most supportive of Medicare for All) and the religious organizations (who were most opposed) is the size.

“Therefore, it could be that with more employees—and potentially more budget and time constraints as a result—these nonprofits are more enthusiastic about a policy they see as essentially taking that burden off their shoulders and helping their employees get quality healthcare,” she said.

So what are the challenges facing health benefits for nonprofits? A majority, 81%, said costs—for another 52%, diversity in employee needs, time (35%) and unpredictable revenue streams (27%).

The concern over cost is no surprise as a nonprofit’s revenue stream can be hard to predict throughout the year, so a benefit like a group health insurance that's expensive and can increase in price every renewal period is difficult to offer. Plus, Bronson says that nonprofit administrators typically wear multiple hats, including a health benefits hat, and don’t have a lot of time to go back and forth between their employees and their insurance company.

Finally, nonprofits employ people in a diverse set of circumstances. Many may be young, living out of state or married and covered through their spouse’s health insurance. Purchasing a group policy that fits everyone is sometimes impossible.

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“Health benefits like HRAs solve these problems by giving nonprofits flexibility to determine their budget and choose how they administer the benefit,” Bronson said. HRAs also give employees the flexibility to purchase their own insurance or use the monthly allowance amounts to reimburse other medical expenses.

“As the federal government continues to explore ways to expand HRAs and other alternatives to group health insurance, they should keep these circumstances in mind and develop policies that address them,” she added.