Not too long ago, employee health benefits were reserved for large corporations with large budgets. The idea of a small business sponsoring an employee benefits plan was a bit far-fetched. Luckily, things have changed and it’s no longer unusual to see a small business sponsor an employee benefits plan. So, what exactly has allowed employee benefits to become affordable for all businesses? The answer lies in a new approach to both plan design and cost containment.
Employee Health Benefits
Let’s start off with some basics. Canadians have access to high-quality public healthcare, but it has its limits: there are still many important healthcare needs that aren’t available through government plans. One way to support the health and well-being of your employees is to sponsor an employee health benefits plan to provide coverage for things that public plans don’t cover.
Plans can be customized based on the benefits you’d like to provide, your budget and your goals for the plan. A typical employee health benefits plan often includes coverage for:
- Prescription drugs
- Vision care
- Paramedical practitioners and equipment
- Dental services (preventative and restorative)
- Life Insurance
- Disability coverage, to provide replacement income if a person can’t work
- Accidental Death and Dismemberment (AD&D) or Accident and Serious Illness (ASI)
A typical employee benefits plan can cost $3,000 or more per employee, per year. These costs vary based on cost-sharing, cost-control mechanisms in place, and how your employees use the plan.
Affordable employee benefits
There are several factors involved in making an employee benefits plan affordable for every business.
Sponsoring an employee health benefits plan doesn’t have to mean that you pay for the entire cost of the plan. It’s not unusual (and is often advisable) for companies to share the cost of the plan with employees. The cost-sharing arrangement can vary, but common arrangements include 80/20 (employer pays for 80% of premiums, the employee pays for 20% of premiums), 70/30, or 90/10.
It’s also possible to share the cost of the plan by having employees pay for the entire cost of premiums for some benefits, while you pay for the entire cost of the premiums for other benefits. This may actually be beneficial for employees in some circumstances. For example, for disability benefits, if you (the employer) pay for any portion of premiums then if the employee becomes disabled and receives disability benefits those benefits would be taxable. However, if the employee had paid for the entire cost of the disability premiums, any disability benefits paid would be non-taxable.
In the end, even if the employee is paying for some of the cost of premiums, they’re still paying much less than if they were to seek out coverage on an individual basis.
- Cost Control
The most important variable that influences the ongoing cost of your employee benefits plan is how the plan is used. If there are cost control mechanisms built into the plan that influence how the plan is used, the plan will be more affordable.
For example, GroupHEALTH’s Smart Rx Solutions can be built into a plan design to help control the cost of prescription drugs. These products encourage employees to use lower-cost (equally effective) prescription drugs and/or central dispensing pharmacies. Employees have an incentive to help control costs, which keeps the plan more affordable.
Disability Management Services are also used as a cost-control mechanism in plan design. GroupHEALTH includes disability management services with all long-term disability plans. These services provide support to both you (the employer) and your ill or injured employee. Support helps the ill or injured employee get safely back to work as soon as they are able. This often shortens the length of the disability claim and helps control disability plan costs.
- Employee Choice
Giving employees choices related to their benefits plan can also help make employee benefit plans affordable for every business. One example is including a Health Spending Account (HSA) as part of the employee benefits plan. A health spending account works like a bank account for health-related expenses. Employees can decide how their benefit dollars are spent; it’s also easy for them to see how many benefit dollars they have left to spend. This element of choice is often well received by employees and any unused amounts are returned to you, the employer.
Building an affordable plan
Building an affordable health benefits plan starts with identifying the goals for your plan. What are you trying to accomplish? Perhaps you’re working on a total compensation strategy for your current employees. Maybe you’re trying to recruit new talent to take your business to the next level. Or maybe you’re worried about retention and want a great benefit plan to help encourage your current employees to stay with your company. Whatever the goal, this should be the starting point as all other decisions should support your goals for the plan.
Next, look for the right employee benefits provider. If you’re looking for an affordable health benefits plan, be careful to avoid providers who are offering you rates that are too good to be true. Chances are, they are too good to be true! You’ll likely be hit with a large rate increase at renewal time, and you’ll soon be riding the cost roller coaster of a poorly designed plan. Instead, look for a provider who has a long-term, sustainable approach to benefits. You’ll want to see specific, thoughtful cost-containment mechanisms that strike a balance between supporting employees and keeping the plan affordable.
If you’re in pursuit of an affordable health benefits plan, your next step is to delve into a budget for the plan. Identify what dollar value you can comfortably afford and work with your benefits provider to tweak the plan to stay within your budget. You don’t want to start off at the high end of your budget and then have to scale back the plan later on. Talk to your provider about expected rate increases and how your budget will accommodate them.
To keep the health benefits plan affordable, you’ll want to have a regular annual review of the plan to assess what is working, and what needs tweaking. Ongoing communication with your benefits plan provider is a must.
Good Advice is Key
Are you looking for an affordable health benefits plan? Review your options with one of our licensed advisors on the phone, or contact us for a comparison quote.
Whether you’re looking for extended health and dental coverage, disability coverage, or life and critical illness coverage, GroupHEALTH has affordable benefits packages that work as hard as you do.