Health plan coverage for mental health treatment is expected to decline this year. Recently, the Trump administration removed federal regulations, and even deleted the web page that had promoted them from the Department of Labor’s site (DOL, formerly at dol.gov/node/100186). In addition, Congress cut funding for the Employee Benefits Security Administration (EBSA), the agency responsible for enforcing mental health parity in most employer-sponsored group plans.
These cutbacks come at a time when the federal government itself recognizes the scope of the crisis. In May 2023, the U.S. Surgeon General issued an advisory warning of “a growing youth mental health crisis” and urging employers and policymakers to expand access to effective care (U.S. Department of Health & Human Services, Surgeon General’s Advisory on Social Media and Youth Mental Health, May 23, 2023).
So what can small business employers do in this environment?
Boost Flexible Benefits
At Freedom Benefits, we’ve long advocated that the most effective approach is to support employee mental health through a flexible benefit plan administered by a third party. The simplest and most cost-effective method is to integrate benefits directly with payroll, so there’s little or no additional overhead for offering a voluntary or employer-funded mental health benefit.
Why Flexible Benefits Work
Cost Control
• Employees often get more value purchasing services directly rather than through large insurance networks.
• Tech-assisted platforms (telehealth, subscription therapy, online counseling apps) have expanded in recent years, offering affordable and convenient options.
• Employers can cap their contribution level, eliminating the risk of open-ended claims costs.Employee Value
• Employees tend to appreciate benefits they can access without insurance restrictions or pre-approvals.
• Flexibility allows them to choose services that best fit their needs.Tax Advantages
• Employer contributions are tax deductible under IRC §162 (ordinary and necessary business expenses).
• Benefits provided under a properly structured health reimbursement arrangement (HRA) (§105) or cafeteria plan (§125) are excluded from employees’ taxable income.Privacy and Security
• Claims are handled by the benefit administrator, not the employer or in-house payroll staff, protecting confidentiality.What Does It Cost?
• Employer contributions can be set at any level, even $0 if the plan is employee-funded through voluntary payroll deductions.
• Administration fees are often under $1,000 per year for micro-businesses when integrated with payroll and accounting services.How to Get Started
To summarize, the key steps for offering mental health benefits in a small business are:
1. Choose a benefits administrator who can design the plan to meet your goals and budget (e.g., Freedom Benefits that has handled these for small business clients since the 1990s).
2. Design the plan. Your administrator will prepare the required plan documents (needed for compliance under ERISA and IRC §125).
3. Integrate with payroll. For micro-businesses, this works best when benefits, payroll and tax services are combined into one integrated accounting service.
4. Give employees direct access to benefit plan support and claims submission through the administrator