HERE’S WHAT EVERY NONPROFIT SHOULD KNOW ABOUT OFFERING HEALTH INSURANCE

By July 22, 2019 Blog

By Lisa Kaplan Gordon

As the U.S. job market tightens, nonprofits seeking to hire the best and brightest candidates face even greater challenges. That’s why offering health insurance benefits to employees has become a powerful lure.

“Offering health insurance has become an extremely important benefit that should be included in all benefits packages for both for-profit and nonprofit companies,” says Dan Sprock, director of people & culture at Fairygodboss, a jobs marketplace online. “Surveys have even shown that employees say they are willing to take a pay cut for a quality benefits package.”

Glassdoor’s 2015 Employment Confidence Survey showed that 79% of employees would prefer new or additional benefits to a pay increase. Of the benefits valued more than a pay raise were:

  • Healthcare insurance: 40%
  • Vacation/paid time off: 37%
  • Performance bonus: 35%
  • Paid sick days: 32%
  • 401(K) plan: 31%

About half of U.S. companies offer health insurance. Among nonprofits with fewer than 50 employers (two-thirds of all nonprofits), 47% offer health insurance benefits to their employees.

Sure, health insurance benefits cost money. On average, employers pay $5,179 annually (83 percent of the premium) to cover a single employee and $12,591 annually (72 percent of the premium) to cover a family, according to PeopleKeep, which helps small businesses offer competitive benefits.

But, the cost of replacing workers who leave your nonprofit in search of better benefits packages is far higher.

A Center for American Progress survey showed that the median cost of replacing an employee is 20% of the worker’s salary.

“Indeed, it is costly to replace workers because of the productivity losses when someone leaves a job, the costs of hiring and training a new employee, and the slower productivity until the new employee gets up to speed in their new job,” says the CAP report.

Offering health insurance is a top contributor to job satisfaction and retention, according to a 2018 Clutch survey. The survey said that over half (55%) of employees say health insurance is the most important benefit in terms of job satisfaction.

Happy employees are more productive employees. University of Warwick research shows that happy employees perform their jobs 12% better, while stressed, dissatisfied workers perform 10% worse.

“If employees receive adequate benefits from their employer and don’t have to worry about health insurance, their satisfaction with their job is likely to increase, which can help with retention rates,” says Sprock. “This benefit can also help offer a competitive advantage where typical nonprofit salaries can not.”

Which nonprofits must offer health insurance

If your nonprofit employs 50 or more full-time employees, you don’t have to offer health insurance, but under the Affordable Care Act (ACA), you’ll be penalized if you don’t provide a minimum level of insurance coverage, says the National Council of Nonprofits. The ACA does not require you to provide health insurance to your part-time employees. If you have any doubt about how to determine if your employee is full-time or part-time, check out this IRS clarification.

You can access insurance through the ACA’s Small Business Health Options Program (SHOP), state-based competitive health insurance marketplaces where individuals and small employers can shop for health insurance online.

Can you afford to offer health insurance?

Can you afford not to? This prized benefit helps attract and retain employees. Here are some health insurance options for nonprofits.

Group health insurance

This generally uniform coverage offers singles and families the same benefits. It’s expensive. In 2015, the average annual premium for group health insurance was $6,251 for a single employee and $17,545 for family coverage, according to PeopleKeep. Further, premiums tend to rise each year. The Mercer National Survey of Employer-Sponsored Health Plans found that in 2016, the average total health benefit cost per employee rose by 2.4%, and 2.6% in 2017.

Don’t sweat; you don’t have to shoulder the total cost. On average, employers pay 83% of the premium for single employees and 72% of the premium for family coverage. One way to bring down the cost of group health insurance is to pick a policy with a high deductible.

Health reimbursement arrangement (HRA)

In this money-saving strategy, nonprofits give employees a tax-free allowance towards out-of-pocket medical expenses and premiums employees pay for their own health insurance. This allows employees to choose the coverage that best suits them, and it lets nonprofits control and predict costs, options not available when they purchase group health insurance.

SHOP Marketplace Group Plan

If you have 50 or fewer employees, you may qualify to purchase state- or federally-run group health insurance through SHOP Marketplaces. If you choose the SHOP plan and have fewer than 25 employees, you may have access to a Small Business Health Care Tax Credit. For tax-exempt nonprofits, the credit is 35% of employer-paid health insurance premiums.

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