Employee Benefits
August 31, 2023
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As a small business owner, you may think offering quality benefits to your employees sounds time consuming and expensive, but it doesn’t have to be. With today’s market conditions and a little help from technology—managing employee benefits is easier than ever.
Just make sure you don’t make one of these 9 employee benefits mistakes….
The individual market can be a more expensive option for you and your employees. Health insurance premiums under a group health plan are paid with pre-tax dollars and on average experience smaller annual rate increases. If that’s not reason enough to go with a group health insurance plan option, let’s look back at how the individual market did in 2016:
Choices in the individual market are limited. Don’t make your employees suffer, switch to a group health insurance plan. But only if you want access to more carriers, a larger network of doctors and hospitals, stronger benefits for your employees and cost savings for the both of you.
When your renewal is around the corner you have one question in mind—what’s my premium increase look like this year? The cost of insurance premiums go up most years. But what if there was a way to keep that cost the same each year? A way that won’t take away from the benefit you’re currently offering. All you have to do is decide how much you would like to contribute to each employee, whether that be a set dollar amount or a percentage, then sit back and relax.
How is this possible?
Through a defined contribution model, you can control your cost and define what your business spends on benefits. No matter how many different lines of coverage you offer and no matter what the coverage costs.
We recommend offering three plans: one with a low deductible, a medium deductible and a high deductible. Giving your employees more options will allow them to choose a plan that meets their family’s medical needs.
Another way to control your cost is through a Level Funded Plan. Level Funded Plans are an affordable alternative to standard small group health insurance plans. Compared to commercial health plans, level funding allows insurance carriers to underwrite for medical risk—so you can find premium rates up to 30% less than what you’re used to paying.
Learn more about Level Funded Plans.
Chances are you don’t hand write each of your employee’s paychecks every month—it’s automated. So why are you still manually managing their benefits?
Tools exist to make this process seamless and fully integrated, from the initial enrollment meeting to benefit selection, employee on-boarding, Human Resource Information Systems (HRIS), requesting and tracking Time Off / PTO, and Payroll deductions. You will wonder how you managed to function without these tools.
Benefits Enrollment, Enroll into a health insurance plan and ancillary products in minutes. Onboarding, enter new hires and have them complete I-9 and W-4 forms electronically. Reports, generate custom reports including payroll deductions and time off management. HR Administration, house all your employee data in one place! No more messy paperwork.
You won’t have to chase your employees down for their signature with e-sign features. And let’s be honest, the computer is more likely to catch an error then you are. Less mistakes means less back and forth with paperwork faster on-boarding
Why online enrollment?
You can cut enrollment time in half with real-time updates on open enrollment progress, generate custom reports instantly and house all your employee data in one place. Also, you will make it much easier for employees to compare their options and enroll into an insurance plan.
At any time throughout the year employees can revisit their account, view their benefits read and documents you post.
Offering voluntary benefits like dental and vision insurance doesn’t have to cost you a dime but it may save your employees hundreds of dollars.
How?
Each benefit is paid for 100% by your employees but at the group or employer sponsored rate (almost always cheaper). Your employees get the best of both worlds—access to richer benefits at a lower cost.
In the individual market (where your employees would have to shop if you didn’t offer benefits) vision and dental insurance are available at a higher cost and with waiting periods. Under a group plan, waiting periods may be waived and the cost is often more affordable for the both of you.
Disability insurance is possibly the most overlooked voluntary benefit. People hear disability and they think permanent, but a disability might be pneumonia or a pregnancy—anything that leaves you unable to work for longer than your sick allotted days allow.
Outside of an employer sponsored plan disability insurance isn’t guaranteed issue. (Guaranteed issue means regardless of an applicant’s health status—the insurance carrier will issue the coverage) That means individuals who are self-employed may not be able to protect their income in the event something happens to them and they can no longer work.
Think of it as insurance for your income. With disability insurance, you continue to get paid until you are healthy enough to return to work.
There’s two types of disability insurance, Short-Term Disability (STD) and Long-Term Disability (LTD):
Short-Term Disability (STD) protects your paycheck and allows you to maintain your standard of living when you become disabled for a short period (up to six months). The benefits will replace a portion of your salary if you’re out of work due to a qualified illness or injury. Pregnancy is covered as a disability.
Long-Term Disability (LTD) allows you to earn a paycheck for an extended length of time while you recover from a more critical illness or injury. Typically, a LTD benefit will kick in after your STD benefit runs out.
Leverage Consumer Driven Accounts (CDAs) such as a Flexible Spending Account, Health Reimbursement Arrangement or Health Savings Account to further control your cost and increase your benefit offering. CDAs are tax-advantaged accounts that save you and your employees money.
Here’s some examples:
Flexible Spending Account (FSA)
An FSA can be funded by employees and/or employers and is used to pay qualified health care (and dependent care) expenses on a tax-free basis. An FSA can only be accessed through an employer.
How does it work?
Employees generally allocate dollars at the beginning of the plan year to pay their out-of-pocket medical expenses with pre-tax dollars. The allocated amount is the employees estimated yearly cost of medical expenses.
For example, say you’re an employee who wants to have Lasik procedure this year and you know it’s going to cost $2,000 dollars—fund your FSA with $2,000. That way you are paying for Lasik with pre-tax dollars. And if the surgery only ends up costing you $1,500 you have until the end of your plan year to spend that additional $500 where you need it—like to purchase your prescriptions. Many employers also allow up to $500 of unused funds to roll over from one plan year to the next.
Health Savings Account (HSA)
An HSA accrues over time. Think of it as a 401(k) for your medical expenses. We recommend offering one HSA eligible plan option to your employees because these plans typically have lower monthly premiums, and they allow your employees to pay your out-of-pocket expenses with pre-tax dollars. So, when your employees choose to open an HSA they will be paying not only their monthly premium with pre-tax dollars but also their out-of-pocket expenses with pre-tax dollars.
Lastly, here’s a simple scenario for a Health Reimbursement Arrangement (HRA):
An HRA is an arrangement established and funded by an employer to help pay employee’s out- of pocket medical expenses.
Say you want to offer two plan options,
Plan #1 costs $400 a month and has a $3,000 deductible
Plan #2 costs $200 a month and has a $6,000 deductible
With an HRA, the $6,000 deductible could look like a $3,000 deductible.
Here’s how it works:
You fund half of your employees deductible. In the right situation (even worst-case scenario meaning your employees all meet their $6,000 deductible), your savings will exceed what you pay out in the reimbursement. Your reimbursements are business expenses that become write-offs at the end of the year.
As you can see, CDAs can help employers and employees save money, but only through a group plan. Individuals cannot access an FSA or HRA without an employer.
A big part of owning a business is knowing the rules and regulations that apply to you and following them. With the rules constantly changing, it’s hard to keep track of what rules are still being enforced. You’ve probably avoided compliance in the past because you simply don’t have time to sort through boring legal documents. But this could be an expensive mistake.
In fact, the consequences for not complying can end up costing your business thousands of dollars.
For example:
One provision under the ERISA law requires employers to provide a Summary Plan Description also known as plan SPDs to participants (your employees) within 30 days of their request. If you fail to do so you could be issued a fine of $110/day.
Your benefits broker should be able to help you with these issues (or consider switching to a new one if he/she is not able to help). It’s not worth the risk.
Both health and ancillary insurance products cost the same no matter where you purchase them because the rates are based on your age, geographic location and other conditions. When you purchase your coverage through sites like HealthCare.gov—you’re on your own. Don’t miss out on the one on one assistance you could’ve had if you went through a private brokerage such as:
Here’s another interesting fact, there’s usually no service fee for going through a broker. Insurance carriers can’t provide the one on one assistance that brokers do. That’s why carriers like UnitedHealthcare appoint thousands of brokers to sell their products at no additional cost to you.
So, if the cost is the same, and brokers will do the work for you, why not utilize the added support? It’s like having a personal assistant for your employee benefits (without paying a penny extra).
Lack of employee education on healthcare options can lead to a lower utilization of benefits. And after you’ve spent your money to make these benefits available, you want to make sure your employees are using them.
You can save money on premiums by teaching your employees to visit quick care facilities instead of going to the ER. And to take advantage of the benefits that are built into their health plans like annual physical exams and mental health services—don’t assume they know.
Your employees may be better off physically and financially with their group benefit versus shopping in the individual market. By educating them, you’re increasing their appreciation too.
Let’s face it—your day is packed. You’re a small business owner. What that actually means is you’re the Human Resource department, manager of your company’s payroll and administrator of your employee’s benefits. You care about your employees, but it can get overwhelming.
We work with you, around your schedule to come up with the best benefits solution for your business. Because we believe every business, no matter the size or yearly revenue, should have access to affordable health and ancillary insurance benefits.
We handle your employee benefits administration process, offer more choices and save you money. How? Through our service focused culture and one stop shop employee benefits platform.
With our platform, your employees can enroll into a health insurance plan with the click of a button so you can go back to doing what you do best—managing your business.
Summary of our services:
IXSolutions brings over 30 years of combined experience to the market as Employee Benefits Consultants. We’ve been bringing creative solutions and alternatives to the market since the inception of the Affordable Care Act.
Today, we work with companies, individuals, and Medicare eligible individuals to provide solutions to the complex insurance industry. We are a trusted partner to thousands of clients, brokers, and associations across the country.
