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Case Study 2: Community Housing Collective

Case Study 2: Community Housing Collective

Nonprofit reduces staff turnover with better benefits package

Wanda Smith, the executive director of the Community Housing Collective, feels that she has developed a team of dedicated employees that serve the needs of people with mental illness in Illinois through accessible, affordable, and supportive housing. In recent years, CHC has seen significant pricing increases and budgetary constraints as a result of the struggling economy. In trying to recoup excess organizational costs, CHC cut their health insurance benefits to employees. This has resulted in increased staff turnover as other organizations are able to better compensate employees with a comprehensive benefit package. Seeing the impact of cutting health insurance benefits on their organization, Wanda hopes that the Affordable Care Act will help meet this organizational need to reduce staff turnover. Wanda believes that a strong employee benefit package is an important offering to keep her small non-profit competitive with other larger organizations.

As part of the non-profit community, Wanda Smith was familiar with the Small Business page at Get Covered Illinois and checked out the website, finding that her organization could be eligible for health insurance through the SHOP.

Because Community Housing Collective has fewer than 50 full-time equivalent employees, the organization is eligible to purchase and enroll in the Illinois health insurance marketplace as an employer. (A larger company, possibly with some part-time staff, could use this calculator to check.)

With the help of a broker, Wanda’s steps will be:

  1. Determine if they are eligible for the employer tax credit to offset up to half of the employer’s premium contributions.
  2. Work with a broker or navigator to compare plans and pricing.
  3. Select a plan for the group. Establish a premium contribution strategy; Wanda will need to pay at least 50% of the single rate to qualify for the tax credit.
  4. Inform and educate employees about their new health insurance options. Assist them in the enrollment process.

STEP 1: Is Community Housing Collective Eligible for the Employer Tax Credit?

Wanda looks at her employee characteristics. She lists the people on her team and their annual income, and calculates the average salary to check if it is less than $50,000, the maximum average salary to qualify for a tax credit.

Employee Payroll
1. Age 35, Family $40,000
2. Age 40, Single $40,000
3. Age 45, with a Child $65,000
4. Age 52, Single $95,000
Average Salary $60,000

There are four core eligibility requirements for the employer tax credit. To be eligible, a business must have fewer than 25 full-time equivalent employees, an average salary of less than $50,000, an employer premium contribution of at least 50%, and the health plan must be a SHOP plan. Wanda checked these requirements using a tax credit calculator.

Requirement Eligibility CHC Requirement Met?
Number of FTEs Less than 25 5 YES!
Average Salary Less than $50,000 $60,000 No!

CHC does not meet the salary requirements to qualify for the employer tax credit, but the organization can still use the SHOP Marketplace as a valuable tool to help compare pricing and options for group health insurance plans.

Additionally, the employer cost of health insurance is still tax deductible as a business expense.

CHC can also implement a Section 125 plan, which allows an employer to ensure that the premium contributions made by employees can be pre-tax. Wanda can work with her accountant or broker to be sure to set this up in compliance with IRS regulations.

STEP 2: Compare Plans Options and Choose a Plan

Wanda used the find-a-broker tool at Get Covered Illinois to locate a broker in her area. With the help of the broker, Wanda looked through all available options and decided that a gold PPO plan through the SHOP marketplace would be the best option for CHC.

The gold plans are one category of qualified health plans, which all meet the Minimum Essential Coverage, or MEC, that her employees have the individual responsibility to meet. Gold plans cover approximately 80% of all covered medical expenses after the policy holder reaches his/her deductible.

STEP 3: Establish an Employer Contribution Strategy

CHC chooses to contribute a high amount to employee premiums keeping costs to employees manageable. CHC chooses a contribution towards premiums of 75%. The employee premium contribution is 25%. Approximate costs can be found in the table below.

If an employee’s share of the premium (for a single) exceeds 9.5% of their income, they could qualify for a premium tax credit on their own in the Marketplace.

At this level, Wanda’s employee contributions are a manageable percentage of income and are considered affordable. If Wanda’s employees were paying more than 9.5% of their income towards health insurance premiums, they could be eligible for financial assistance on the health insurance marketplace.

Employee Total
Premium
CHC Contribution
(75% of all)
Employee Premium Contribution
(25% of all)
1. age 35, Spouse age 32, Child age 4 $800.00 $600.00 $200.00
2. age 40 $350.00 $262.50 $87.50
3. age 45, Child age 12 $525.00 $393.75 $131.25
4. age 63 $550.00 $412.50 $137.50
Total $2,225.00 $1,668.75 $834.38

STEP 4: Educate Employees on New Health Insurance Options

Wanda is thrilled to let her employees know that health insurance is offered again through Community Housing Collective. She also lets employees know that there are alternatives such as Medicaid and the health insurance marketplace to explore additional options. All employees chose to enroll in the health plan through CHC. Wanda anticipates less staff turnover now that health benefits have been reinstated.

Conclusion

The process of working with a broker, selecting a plan, and educating employees led to high enrollment in a SHOP group plan, which resulted in affordable health insurance coverage for every single employee at the Community Housing Collective. Despite being ineligible for a tax credit, working with a broker allowed the CHC to understand that contributions towards employee premiums are tax deductible. Utilizing SHOP also helped with the comparison of plan options. Ultimately, this decision and process benefited both CHC as a business and its employees.

 

Is This Similar to Your Business?
Contact a certified broker or navigator to help you through the process of comparing plans and prices for you and your employees. They can help you in working through the steps to determine your best course of action. And if your particular small business’ health insurance challenge does not resemble this one, take a look at our other case studies.