Working in the weed business isn’t without its highs and lows. Most cannabis companies are cash rich, literally under-banked and considered high risk by insurance providers across the spectrum. Beyond that, the laws are complicated around whether these companies can reap the tax benefits that typically come with offering employer-sponsored health insurance.
The good news for employees, however, is that 71% of cannabis companies are offering healthcare benefits, according to a 2022 Cannabis Industry Salary Guide.
This isn’t entirely surprising considering cannabis businesses with at least 50 full-time or full-time equivalent employees are required to offer employee health care plans under the Affordable Care Act’s Employer Shared Responsibility Provision (ESRP).
Still, many benefit service providers are reluctant to work with these companies because cannabis is classified as a “Schedule I controlled substance” under the federal Controlled Substances Act of 1970. Even though the National Conference of State Legislature reports 37 states, three territories and D.C. allow for medical marijuana usage, and 21 states, two territories and D.C. have legalized cannabis for adult non-medical use, cannabis trafficking can be subject to federal prosecution.
It’s a labyrinth for the cannabis industry and companies that do business with it. One way out of the maze is to forgo traditional group health plans and switch to an Individual Coverage Health Reimbursement Arrangement, or ICHRA.
Read on to learn more about how ICHRAs can help cannabis companies provide compliant health insurance to their employees.
Don’t pay higher premiums. Most group health insurance providers consider the cannabis industry to be high risk, which means that those willing to serve these businesses do so at significantly higher rates. By looking at employees as individuals rather than a group, ICHRAs disperse the risk that drives premiums up for employers.
Say goodbye to sourcing and negotiating new plans every year. Renewal rate hikes are on the rise across the board, but they can be even more significant for high-risk industries like cannabis. When that renewal rate comes out, HR teams are charged with finding a less costly option. It’s a time-consuming and expensive distraction from the company’s actual business operation. An ICHRA eliminates the need for these renewal games altogether.
Skip the traditional self-insured route. When group health plans become financially unsustainable, many cannabis companies switch to a self-funded route. But this approach comes with its own set of risks in the form of the cash reserves and stable cash flow needed to self-insure. An ICHRA takes away this risk and offers companies cost predictability.
Bolster your tax team. Navigating IRS Code 280e can cause enough anxiety to make anyone reach for an edible. The list of disallowed tax deductions for cannabis businesses is extensive. And the list of exceptions further adds to the complexity. Experienced third-party benefits administrators that specialize in ICHRA will work closely with cannabis clients and their tax, financial, and legal teams to determine if their reimbursements to ICHRA-enrolled employees are compliant tax-free.
Increase employee satisfaction. Even if a cannabis company can find a way to make traditional group health insurance work, there’s a good chance its workers won’t be happy. Benefits customization is one of the biggest employment requests for both new and existing employees. An ICHRA provides the ultimate flexibility by allowing each employee to choose the coverage that fits with their personal needs, budget, and location.
SureCo recognizes that the cannabis industry is growing rapidly, but traditional insurance organizations and banking institutions have not yet integrated their products into the sector. That’s why we’ve stepped up our value proposition for cannabis companies on the market for employee healthcare benefits. Download our ICHRA 101 Guide to learn more or get a free consultation from one of our benefits advisors.