Maximizing Health Benefits for Your Franchise (With a Budget-Friendly Alternative)

As a franchise owner, you have a unique opportunity to make a positive impact on the lives of your franchisees. Not only can you offer them the chance to become successful entrepreneurs, but you can also support their well-being by providing access to quality health benefits.

Exploring Health Benefit Choices for Franchisees

The two most common health insurance plans for franchises are:

1) Association Plans

A type of health insurance arrangement where multiple small businesses, often from a similar industry or geographic location, join together through an association or organization to collectively purchase and provide health insurance coverage for their employees.

2) Multiple Employer Welfare Arrangements (MEWAs)

A Multiple Employer Welfare Arrangement (MEWA) is a health insurance arrangement in which multiple small businesses come together to collectively offer health benefits to their employees. Unlike traditional group health insurance plans, MEWAs allow unrelated businesses to join forces, often within the same industry or region, to pool their resources and purchasing power for the purpose of obtaining more affordable and comprehensive health coverage options for their employees. MEWAs are typically established through an organization or third-party administrator and can provide an alternative to individual small business health plans.

But there is a catch...

While Association Plans and MEWAs are popular among franchises, they come with significant challenges. They are expensive to  establish and maintain due to administrative costs and regulatory compliance.

In addition, they are susceptible to what industry experts refer to as the "Death Spiral." This phenomenon occurs when the plan's premiums become increasingly expensive, leading healthier individuals to opt out, leaving a sicker and more costly pool of participants. As a result, the rising costs and instability within these plans can lead to their eventual collapse within just a few years, posing challenges for franchise businesses seeking reliable and affordable health insurance solutions. Association Plans and MEWAs frequently fall apart within their first two years.

The Best Health Insurance Option for Franchisees

For franchisees seeking comprehensive, but budget-friendly health insurance solutions, the Individual Coverage Health Reimbursement Arrangement (ICHRA) is often the best choice. ICHRA offers franchise owners several distinct advantages.

1) Flexibility

Franchisees can tailor health benefits to individual employee needs, providing greater control and customization over their health coverage offerings. Each franchisees can also decide to opt-in or out of an ICHRA program, and it will not impact the larger group. In contrast, Association Plans and MEWAs tend to be "all or nothing." The majority, if not all of your franchisees, must participate in an Association Plan or MEWA.

2) Employee Choice

ICHRA allows employees to select and purchase their preferred health insurance plans, fostering greater autonomy and satisfaction among the workforce.

3) Cost-Effective

ICHRA can be cost-effective, as employers contribute tax-free funds toward employees' health expenses, potentially reducing overall healthcare costs for both the franchisee and their employees. ICHRAs have minimal setup costs, if any, to the parent franchise organization.

4) Simplicity

Lastly, ICHRA avoids the complexities and potential pitfalls associated with traditional group plans, making it an attractive and practical option for franchise businesses looking to provide quality health benefits while maintaining financial stability.

Is an ICHRA right for my franchisees?

Evaluating whether an ICHRA is the right fit for your franchisees involves considering several important factors:

1. Market Availability: Investigate the availability and diversity of individual health insurance plans in the geographic locations where your franchise operates. A limited selection could limit the choices available to employees.‍
2. Employee Satisfaction: Gauge employee satisfaction with the current health benefits, if any, and whether the autonomy offered by ICHRA would be a welcomed change.‍
3. Employee Needs: Consider the healthcare needs and preferences of your franchise employees. ICHRA provides them with the freedom to select individual health plans, so understanding their requirements is crucial.
4. Competitive Advantage: Assess whether offering ICHRA could be a competitive advantage in attracting and retaining talented employees within your franchise network.
5. Budget Constraints: Assess your franchise's budget and financial capacity to contribute to employee health expenses. ICHRA allows you to determine the contribution amount, offering flexibility in managing costs.
6. Administrative Resources: Evaluate whether your franchise has the administrative resources or the support of an experienced ICHRAadministrator like Venteur to manage the complexities of ICHRA, including compliance, record-keeping, and communication.

By carefully evaluating these factors, you can make an informed decision on whether ICHRA is the right choice for your franchisees and tailor the arrangement to suit your specific needs and circumstances effectively.

The Bottom Line: Making Informed Health Benefit Decisions

As a franchise owner, the health and well-being of your team should always be a top priority. By offering health benefits, you not only enhance the overall morale and happiness of your franchisees but also ensure that your business thrives in the long run. Ultimately, by making informed health benefit decisions, you can maximize the well-being and success of your franchise. So, go ahead and explore the options. If you are looking for thought partner to help you evaluate your decision, our team at Venteur is on standby to assist you!