Health benefits for religious nonprofit organizations

Health benefit options for religious nonprofit organizations

Running a small faith-based nonprofit can be challenging due to a tight budget, limited resources, and a potentially small staff size. But you can still support your religious professionals in the best way possible, so they’ll be in great shape to care for your members.

Luckily, many church health plan options can provide comprehensive coverage within your budget. Below, we’ll explore your options for offering your church employees a health benefit.

Health reimbursement arrangements (HRAs) for faith-based nonprofits

Health reimbursement arrangements (HRAs) are customizable health benefits that offer the best value for your nonprofit. With an HRA, church leaders of all sizes can reimburse their employees tax-free for qualified out-of-pocket medical expenses. Examples of eligible expenses include prescription drugs, over-the-counter medicine, emergency care, individual health insurance premiums, and more.

Setting up an HRA is simple. You set a monthly allowance that your eligible employees can spend on healthcare items and services. Once employees make an approved purchase, you reimburse them tax-free up to their allowance amount. For added flexibility, you can even choose what medical expenses are eligible for reimbursement.

Because they’re customizable, offering an HRA instead of group health insurance is an excellent way to better attract and retain employees to your faith-based nonprofit—no matter your staff size, budget, or location.

The following are three common types of HRAs that church leaders can offer at their nonprofits:

• Qualified small employer HRA (QSEHRA): The QSEHRA is for employers with fewer than 50 full-time equivalent employees (FTEs) who don’t offer any type of group plan. The QSEHRA has maximum annual contribution limits but no minimum limits. If your employee’s QSEHRA allowance is unaffordable, it can also coordinate with premium tax credits. Employees must have a health plan with minimum essential coverage (MEC) to participate in the benefit.
• Individual coverage HRA (ICHRA): An ICHRA is for nonprofit organizations of all sizes. It has no maximum contribution limits and allows you to vary allowance amounts by employee class. Suppose you’re an applicable large employer (ALE). In that case, an ICHRA can help you satisfy the Affordable Care Act (ACA)'s employer mandate as long as your allowance is affordable and your employees have a qualifying form of individual health insurance coverage. The ICHRA also allows employees to opt in or out based on affordability.
• Group coverage HRA (GCHRA): If you’re already offering group health coverage, you can keep your policy and supplement it with a GCHRA. Also known as an integrated HRA, employers of all sizes can reimburse their employees for out-of-pocket healthcare costs their group plan doesn’t fully cover, like coinsurance and copays. Only employees enrolled in your group health can participate. However, they have no maximum contribution limits.

It’s also important to keep in mind that those in a healthcare sharing ministry aren’t eligible to participate in an HRA, as the federal government doesn’t consider it MEC.

You don’t have to self-administer your HRA to save time and money. With benefits administration software like PeopleKeep, we can help you manage complicated tasks, like creating plan documents, following compliance regulations, and reviewing employee reimbursement requests.

With a simple user interface and an award-winning customer support team, we’re eager to assist you in your endeavor to offer your staff affordable and comprehensive health benefits so you can spend more time managing your religious nonprofit.

Traditional group health insurance

Traditional group health insurance, also known as an employer-sponsored health plan, covers almost 153 million Americans, making it a familiar health insurance option for most individuals. With this type of health benefit, nonprofit business owners purchase group health policies for their company either through an insurance company, a broker, or an agent. Employees can then enroll in the plan at a reduced premium rate.

There are many types of group health insurance plans available for faith-based organizations, including:

• Preferred provider organization plans (PPOs)
• Health maintenance organizations (HMOs)
• Exclusive provider organizations (EPOs)
• Point of service plans (POSs)

If you’re a small nonprofit owner and live in a covered state, you can use the Small Business Health Options Program (SHOP) marketplace to find a health plan. You may also qualify for the small business health care tax credit to reduce your premium costs.

While group plans are popular, they’re not your only choice. Traditional group health insurance can have plan limitations, and most have minimum participation rates. They also have expensive premiums and annual rate hikes. Because of these complications, many small nonprofits don’t find group plans feasible.

Religious nonprofits may have better results with an alternative to expensive group health insurance, like HRAs. But let’s briefly examine a couple more customizable options in the sections below.

Self-funded insurance plans

A self-funded insurance plan is another health benefit option for churches to avoid the costly premiums and restrictions of group policies. With a self-funded plan, church leaders take on the financial risk of providing medical care to their staff. This means you’ll pay for each employee's claims for healthcare expenses instead of paying a monthly premium to an insurance provider.

You can achieve this by setting up a trust fund to which you and your employees contribute to pay claims. You estimate the maximum annual liability of your employees’ claims that you’re comfortable taking on, typically ranging from $100,000 to $2 million. You can also pair the trust fund with a stop-loss policy to limit your risk.

While self-funded plans have personalization options, they have potential drawbacks that may not meet your organization’s needs. They can be complex to administer, require third-party management services, and have unexpectedly large claims, making them a hassle long-term.

Health stipends

If you have few employees and want a more informal health benefit, you can consider a health stipend. With a stipend, organizations can offer their religious professionals a fixed amount of money that they can spend on insurance premiums and other out-of-pocket healthcare costs.

The stipend is essentially extra money added to your staff’s paycheck for them to use however they like. While this makes the administration process easy, it also means stipend money counts as taxable income for employees, and employers are also subject to payroll taxes.

On the upside, employees can participate in your nonprofit’s health stipend and collect their full premium tax credit without subsidy reduction or compliance issues. However, a stipend won't satisfy the employer mandate if your faith-based organization has 50 or more FTEs. So, you’d need to offer a group health insurance plan or an ICHRA to comply with federal law.