Companies often have an employee benefits plan that provides extensive health, dental, drug and vision coverage to their employees. But what happens if a company cannot afford (or can no longer afford) an employee benefits plan? Employee benefits outside of your budget?

Employee benefit plans (aka “group health insurance”) are pro-rated, which means that premiums will increase if your employees submit numerous claims for re-imbursement. As a result, a benefits plan that was once affordable may then be outside your company’s budget.

Does this automatically mean that a business in this situation has to terminate all employee benefits?

The answer to this is a firm “no”!

For ways to control costs and still be able to offer your employees health benefits please consider the following suggestions.

Share the Cost with Employees

One option is to share the benefit costs with your employees.

While this may not be very palatable with your employees, it still provides benefits with cost savings to the sponsoring company.

It comes down to how much your employees want to keep the extensive coverage associated with a traditional group insurance plan. Is it worth enough to them to shell out money for some of the benefits costs, or to accept less coverage?

There are two way by which costs can be shared with your employees:

1. Co-insurance factors: reduce the amount of coverage your employee benefits plan offers. For example, dental, prescription drug and therapist coverage can be reduced from paying out 100% to paying out 80% of costs. 
2. Premium sharing: companies usually pay out anywhere from 50% to 100% of the insurance premiums. To save money the sponsoring company could shift some of the premiums to the employees.

Personal Group Insurance Plans

To save money a company could offer all of their employees guaranteed issue personal health insurance. These plans have no medical questions, are designed for individuals and families, and ARE NOT traditional employee benefits (click here for more).

To put it simply: these guaranteed issue personal plans are cheaper than traditional employee benefits since they offer less coverage than group plans. The biggest difference between the two is that the personal health plans have substantially lower overall yearly maximums compared to the group coverage.

Here are some sample monthly premiums for a guaranteed issue individual health plan that we use for employee benefits:

* Rates are for 3 children ages 5, 10 and 15 years old

Health Spending Account

A Healthcare Spending Account (HSA or HCSA) does not immediately reduce employee benefits premiums. Rather, it fixes the amount of money employees can spend on their benefits, which will help to keep premium increases down when it comes to renewal time.

Claims are submitted and processed for re-imbursement in the exact same way as a standard group insurance plan.

At the beginning of each benefit year each employee receives an allotted amount of money that is set aside for their expenditures. Once this maximum is reached the benefits no longer pay out.

Note that it is a common practice to classify employees, with each classification receiving a different amount of allocated funds (e.g. one class for managers, another class for regular employees, etc.)

Conclusion

We hope you found this blog article “Employee Benefits Outside of Your Budget?” useful.

Please contact us toll free (1-800-474-4474) if you have any questions about group insurance plans.

As brokers we are here to help!