Employee Benefits
August 31, 2023
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Offering desirable benefits can be pricey (and overwhelming). And with little wiggle room in your budget, the cost can be difficult to swallow.
If you’re nodding your head right now, you’re not alone—one of the top concerns keeping small business owners up at night is the cost of health care. *
To top it off, most employees rely completely on their employers to provide benefits.
In fact, 64% of employees look for benefits from their employer. And if your business doesn’t offer the benefits they desire, they will find one that does.
The truth is—there are plenty of easy, low cost, even free ways to show your employees you care.
Skeptic? Maybe you just know all your options. We’ve highlighted 9 of our personal favorites right here.
In this post you’ll learn not only which employee benefits are gaining traction, but why they are becoming so popular.
You save money for all sorts of things…whether it’s for your kid’s college fund, or just a rainy-day. But we tend to not save for medical emergencies. Perhaps because we never want to imagine them ever happening. This could be why medical bills are one of the top ranked reasons people go bankrupt.
Opening a Health Savings Account (HSA) is an easy way to set money aside for that stormy day.
Did you know that an HSA has similar tax-free savings benefit as a 401k plan? Some would even say it’s a better savings vehicle than a 401k plan due to the triple tax benefits of HSA.
Money that goes into an HSA account is tax-deductible (tax-free)
Money in an HSA account can be invested like a 401k plan or accrue interest through a savings account. The earned interest and investment earnings will grow tax free.
Any money you spend on medical expenses can be taken out of your HSA tax-free. It’s estimated that an average couple will spend over $250,000 in medical expenses after the age of 65. And that’s only on premiums. Employers benefit with HSAs by paying less in premiums when employees enroll in an HSA compatible plan.
o, if you’re looking to save, consider offering an HSA compatible plan option.
HSA eligible health plans are typically High Deductible Health Plans (HDHP), meaning they have lower monthly premiums. And they allow your employees to pay their out-of-pocket expenses with pre-tax dollars.
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.
Offering voluntary benefits is the easiest way to attract and retain employees. You can save your employees hundreds of dollars a year without spending a dime.
How?
Each voluntary benefit is paid for 100% by your employees but at the group or employer sponsored rate, which is 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) dental and vision insurance cost significantly more and have waiting periods on most major services. Under employer sponsored plans, waiting periods are waived and the cost is more affordable for both of you.
Compete with Larger Corporations (without having to spend more)
Small business owners are constantly looking for ways to attract and retain employees without spending a fortune.
You can offer more benefit options that are usually made available through larger employers without spending extra. By simply making dental, vision and disability benefits available, your employees will have access to better benefits.
Give your employees the gift of financial security with possibly the most overlooked and misunderstood voluntary benefit—disability insurance.
People hear disability and they think permanent, but a disability might be pneumonia or even a planned pregnancy. Really anything that leaves you unable to work for longer than your PTO (paid time off).
Think of it as insurance for your income. With disability insurance, you continue to get paid (approximately 60% of your income) 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):
Long-term disability insurance replaces up to two-thirds of your income if you can no longer do your job and premiums tend to be 1 to 3 percent of your annual income.
Individual disability insurance is difficult (not to mention expensive) for your employees to get on their own. You are the only think standing in the way between them, and access to more affordable, better disability coverage. It doesn’t have to be that way! You can easily make disability insurance available through your business and you don’t even have to spend any money.
Millennials are said to switch companies over eleven times in their career. How can you retain younger employees? How many of them do you think have student debt?
Maybe you need to reconsider what matters to your employees.
Hint: it’s not the gym membership you’re currently offering.
Student Loan Repayment Assistance
Relieve them of the number one financial burden on their shoulders—and they may be more likely to stick around awhile.
Student loan repayment assistance is when an employer helps its employees pay back their student loan dept.
More of your employees have student debt than you think. According to Peanut Butter, a student loan repayment benefits administrator, 44 million Americans carry student debt.
Peanut Butter helps employers offer student loan assistance as a benefit in a flexible, affordable way.
Many employers are starting to offer some form of student loan-repayment assistance to their employees. It’s a smart way to retain smart talent.
Most of your employees will never meet their deductible. And that’s not a bad thing, it means they’re healthy. But it also means you are paying more on premiums for deductible that most of your employees never meet. The better solution is to increase the plan deductible to save money on premiums without increasing the deductible employees are responsible for. This is made possible through a Health Reimbursement Arrangement (HRA).
A HRA is an arrangement established and funded by an employer to help pay employee’s out-of-pocket medical expenses.
This consumer driven plan is entirely funded by the employer and provides tax-free reimbursements to employees for larger (often unexpected) medical expenses.
Say you want to offer two plan options
The $6,000 deductible could look like a $3,000 deductible by committing to funding the back half your employee’s deductible if needed. The logic behind this strategy is to save money on premiums knowing that most employees won’t reach their portion of the deductible. And for those who reach the deductible, you can fund the remaining portion of their deductible and still save money on your overall healthcare costs.
The best part is your reimbursements can be expensed at the end of each year.
The expense of maintaining and insuring our health shouldn’t prevent people from taking care of themselves. But it does.
In fact, 27 percent of Americans in 2017 say they have put off or postponed getting health care they needed because they couldn’t afford the necessary care—per a poll taken by the Kaiser Family Foundation.
And no matter how healthy or sick your employees are—you pay a set premium every month to protect them. And you’re typically locked into that rate for 12 months.
This can be solved by introducing a level funded product within your business.
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—you can find premium rates up to 30% less than what you’re used to paying.
Level funding is an ACA Compliant group insurance option for your business that combines the predictable costs of a fully insured commercial plan with all the advantages of self-funding.
Hybrid Between Fully Insured and Self-Insured Plans
Fully Insured
A health insurance plan set up so your business pays your employee’s premiums at a fixed rate based on the number of enrollees in the plan.
The insurance carrier determines the fixed rate based on their risk assessment of insuring your employees.
When your employees start to have health issues and need to use their plans more, you can expect a noticeable increase in your fixed rate when your plan renews. On the other hand, if your employees rarely use their plan you’re still paying a fixed rate…
Overall this option decreases the risk of fluctuating monthly cost but doesn’t give any incentive for having healthy employees.
Self-Insured
You assume the financial responsibility of health insurance benefits for your employees in a self-insured plan. Basically, your business manages the risk and pays the claims instead of the insurance carrier.
Many small businesses are unable to review and process claims in house so they will contract with a third-party administrator (TPA) to provide administrative services for the plan.
Level Funded Hybrid
These plans are technically self-insured, but they feel like they are fully insured. After medical underwriting your premiums are fixed like a fully insured plan. However, in the event of a good claims year, you can receive a return of premium just like a self-insured plan.
Who fits the level funded model best?
Work-site clinics that offer general medical services can reduce your healthcare costs by 9%. But that’s not the only reason they’re getting so much attention:
Happy and healthy employees increase morale in the workplace and are more productive. Employees that get more done are making more money for your business, it’s a no brainer!
Even small gestures like having fresh fruit delivered to the office on occasion can go a long way.
A small business in Chicago converted one of their conference rooms into a spa once a month. Professional therapists would treat their employees to a 15-minute chair massage, along with aroma and music therapy (the costs of administering this benefit is minimum).
Your employees will thank you.
They’re coming back! The Department of Labor has proposed new rules that aim to expand the availability of association health plans (AHPs) in the small group market.
This will benefit small groups 2-50 employees and the smaller (but mighty) workforce—the self-employed. They can officially reap the benefits large employers do by joining hands and becoming one large group.
According to the NY Times, nearly 11 million Americans would gain coverage under AHPs. For some states where private insurance companies no longer offer health plans, this is a dream come true.
AHPs are exempt from offering the ten essential health benefits of the Affordable Care Act. By carving out specific benefits, young healthy groups with over 50 employees will have cheaper premiums.
New administration, new rules. A big part of owning a business is knowing which rules and regulations apply to you. With government policies constantly changing, it’s hard to keep track of what regulations 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.
New administration, new rules. A big part of owning a business is knowing which rules and regulations apply to you. With government policies constantly changing, it’s hard to keep track of what regulations 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.
The consequences for not complying may end up costing your business thousands of dollars.
One provision under the ERISA law requires employers to provide a Summary Plan Description also known as plan SPDs to all participants (your employees) within 30 days of their request. If you fail to do so you could be issued a fine of $110/day.
The easiest way for you to start complying with the requirements of ERISA is by preparing a written document, often referred to as a Wrap Document, which provides your employees with the important plan information they’re supposed to receive in writing.
A Premium Only Plan (POP) document allows you to save 20% on insurance premiums without changing your benefit offering.
Without a POP document on file, your employees cannot legally pay their health insurance premiums pre-taxed. If you don’t have a POP document in placed, you can be held liable for thousands of dollars of fine.
Pre-tax your employees’ salaries for benefits including prescription, dental, vision, term life (up to $50,000), voluntary benefits and HSA funding.
Legally this must be on file to pre-tax your benefits. If you think you might already have this on file, check with your payroll administrator or Human Resources.
If you know you don’t have this file, you should. It’s a one-time fee, worth the plans lifetime in savings.
Your benefits broker should provide you with these documents upon initial enrollment. Consider switching to a new one if he/she is not able to help you (at the very least) remain compliant. It’s not worth the risk.
Every benefit listed in this article has been tested by businesses just like yours and worked.
Remember, offering a variety of benefits doesn’t just make your business appealing to work at, it makes your business appealing to continue working at.
Adding just one of these benefits to your offering can double your employee retention rate without doubling what you spend.
Employees with great benefits are less stressed. And stress-free employees help your business be successful.
Start by looking at your current benefit offering and see where you can try to incorporate them more often. Just take note of the examples in this post and follow the steps to implementing one of these benefits in your business. Then sit back and watch the positive effect it has on your business.
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.
