Health Reimbursement Accounts a Boon for Dental Practices

You’re going to have healthier, happier individuals, which will ultimately affect the productive bottom line.

Health insurance is expensive. Perhaps that’s an understatement. And when the Affordable Care Act took away the ability for employers to reimbursement their workers for medical expenses on a tax-free basis, it was a hardship.

It also left a gaping hole where small employers had previously been able to provide some sort of benefit to their employees.

So in December 2016, Congress passed the 21^st Century Cures Act, which went into effect Jan. 1, 2017, enabling small employers to set up a Qualified Small Employer Health Reimbursement Arrangement, or QSEHRA, as a way to contribute toward their employees’ healthcare costs.

Rebecca Boartfield, a human resources consultant with Bent Ericksen & Associates in Eugene, Oregon, says the ability of small businesses, such as dental practices, to offer a health benefit to employees is a huge plus.

“More and more, benefits are becoming important to the working class,” Boartfield says. “An employer that says, ‘Well, I don’t offer anything for health insurance’ is going to be at a disadvantage.”

KEY CRITERIA

According to the IRS, there are specific criteria that must be met for a small employer to offer a QSEHRA to employees. To be eligible to offer a QSEHRA, an employer must have fewer than 50 full-time employees, and not offer a group health plan.

Boartfield says that most dental practices likely meet those criteria.

“A huge majority of the clients we work with don’t provide health insurance to their employees,” she says. “It’s just too expensive.”

Small employers are limited to an annual maximum reimbursement of $4,950 per employee. Employers can contribute less per calendar year, such as $2,000 or even $1,000, and it’s also a tax incentive for employers offering this benefit. However, since the benefit option has been available for less than one year, Boartfield says it’s too early to develop a formula by which employers can determine the right amount for their practice to contribute.

“The one client that I worked with that has put this into effect, they had a definitive amount that they were willing to put in every month towards the premium,” she explains. “They basically looked at their bottom line and said, ‘Okay, I’ve got 10 employees. And if I put in $200 a month for my employees, that’s something that I could afford.’ So I think most of them are looking at this on a monthly basis, you know, and how much can I afford each month per employee, and kind of going from there.”

INCREASING AWARENESS

Boartfield likens the QSEHRA benefit to other tax incentive programs such as flexible spending accounts. Those accounts operate in a similar fashion, in that an employer puts a tax-free benefit into an account and employees can take reimbursement from that.

“Those have always been seen as attractive to people who are considering working at that location,” she says.

As with anything new, education is important to increasing the awareness of an available benefit. Boartfield says there hasn’t been enough publicity and spread of knowledge yet about QSEHRAs for employers to take full advantage, but hopes that will change soon.

“I do think it’s a program employers could really take advantage of.”

One important caveat is that employers must provide written notice to employees 90 days prior to the start of the plan. That statement must include the employee’s allowed benefit, and must advise employees that they are responsible for notifying the insurance exchange of the coverage amount for the purposes of determining eligibility for the premium tax credit.

“You can start in the middle of the calendar year,” Boartfield says. “It would just mean that the annual benefit would be less. But you still must have a 90-day notice period.”

And because the use of QSEHRAs did not take effect until Jan. 1, 2017, Boartfield believes 2018 will be an important year.

“That’s where this is really going to have an impact,” she says. “Because if anybody is going to [implement QSEHRAs], they’re setting it up right now for calendar year 2018.”

WIDE-RANGING BENEFITS

Beyond the tax benefits, Boartfield believes there are significant advantages to small dental practices providing their employees with access to QSEHRAs. She explains that if employees can afford coverage, and afford to obtain medical care for themselves, they’re going to be healthier individuals.

“You can look at it as providing a way for people to take care of themselves, and be more productive in the workplace,” she says. “Just going in for preventive care on a more regular basis because now they have a way to afford that. You’re going to have healthier, happier individuals, which will ultimately affect the productive bottom line.”