An employers guide to restructuring and optimizing benefits spending. 

Written By: Christopher D Martin for the Small Business Owner & Team

Families who are trying to manage their health care expenses continue to disapprove of the increase in out-of-pocket costs which average nowadays to be about $13,000 annually for a family of four. According to reports, over 17-million Americans have now shifted to these high deductible medical plans, but are struggling to manage these costs. According to surveys, the new age healthcare consumer lacks the knowledge necessary to manage this increased medical expenditure so some changes need to be considered. 

So who is to blame for this lack of sophistication? 

Similar to, say, 401-k planning and other financial investments, employees are struggling to understand what types of health insurance products are available and why they would be benefited by choosing them. This lack of education leaves employees frustrated, confused, and/or pressured to buy into plans that do not meet their financial and physical needs. What is equally concerning is that most companies are spending hundreds of thousands of dollars on these so called “benefits” but are under the perception they are providing coverage that satisfies their employees needs. The solution to this misunderstanding lies within education and is that simple. 

Let’s address this... 

So who should choose your medical plan? 

Too many employers do not involve the employee in the purchasing process when it comes to choosing health insurance. Traditionally, most employers simply pick out one or two medical plans each year on behalf of the employee and expect the employee to adapt to the new plans without much guidance or rationale. Well, that system just isn’t cutting it anymore. 

The solution to ill-perceived benefits is called — “Defined Benefit Contribution”.

Let the employee go shopping and pick their own plans! 

Best practices suggest that offering your employees multiple insurance plans and allowing them to choose which ones they want to enroll in creates higher benefit satisfaction overall. 

As a matter of fact in Wisconsin proactive companies have found that by providing a fixed benefit allowance stabilizes their annual benefit costs as opposed to just paying for a “percentage of total cost”. Think about it, if an employer is paying 50% of the employee medical cost, and the medical renewal premium goes up (which it consistently does each year due to medical inflation), then the employer and employee costs shoot up respectively. On the other hand, a company that provides all employees with the same “benefit allowance”, for example $300 per employee per month, can keep their health care budget consistent while also maintaining the flexibility to adjust their contributions each year as needed. 

It makes sense, some employees will choose lower deductibles that provide for lower out-of-pocket costs, while other employees will choose higher deductibles in order to lower their premium costs. In addition to greater financial stability, this contribution approach also provides risk mitigation coverage that employees otherwise would not have access to in the individual markets (for example $250,000 life insurance coverage regardless of pre-existing conditions with no medical questions asked). 

Supplemental programs enhance benefits and improve patient outcomes. 

Surveys attest to the fact that when an employer allows the employees to customize their own benefits portfolios by purchasing supplemental products they become more involved, empowered consumers throughout the purchasing process. This, in-turn increases loyalty, satisfaction, and productivity in the workplace while also allowing for the employees to make autonomous decisions as it relates to the specific types of health risks that they are concerned with. 

“My cancer treatment includes medicines and certain procedures that our healthcare provider will not recognize because they consider them to be “experimental”. What am I going to do”? 

For example , if an employee is diagnosed with cancer, they can use the funds from their cancer policy to pay for any experimental treatments typically not covered by health insurance (ie. trips to see a specialist, or even end-of-life decision making, such as a retreat or vacation if the illness is terminal and/or the patient decides to neglect or refuse the treatment due to prolonged pain and suffering). Additional “a la carte” options such as accident coverage, long-term care insurance, specific hospital plans, and many more hybrid product solutions have also begun to emerge to help employees pay for their health care procedures in a tax efficient manner. 

Great Benefits - Great Team!

Make sure you are playing the tax game efficiently! 

Remember, cash flow is KING! By helping employees learn the intricacies of tax deductions through optimization of benefit planning, money will remain in and/or return to the pocketbook. Employers and employees need to recognize advantages of the tax benefits offered through health savings accounts, flexible spending accounts, health reimbursement arrangements, and group TAX FREE premium-only plan designs. Such services continue to lead the market as helpful tools to reduce taxable income on behalf of corporations and individual families.

Enhance the benefits through a personalized approach!

It is essential that all employees are provided with a clear, concise method of organization of health and wellness records and benefit information. How you communicate your benefit programs to your employees is what will set your company apart from the company next door; not just from an efficiency standpoint as you manage your business, but also from a communication standpoint! 

“I had the misfortune of getting sick around Christmas. Follow-up care was needed in January. With calendar year deductibles, I ended up paying over $6000, more than half of the charges. What kind of insurance is that? 

The big key to success will be addressing each employees individual questions throughout the initial enrollment process and making sure that the employees understand what it is they are buying and how the programs work. Enrollment is best done in a one-on-one setting with the employees and a benefits counselor who can provide full enrollment assistance and answer all their technical questions. Having access to benefit counselors who can help employees navigate the healthcare system not only improves morale but also reduces the workload of the human resources team. 

Create a message of wellness for your tribe! 

Most insurance companies are structuring incentives to reward employees for enrolling in fitness memberships, maintaining health with wellness checks (ie. annual vaccines, routine screenings, etc.), and reducing risk factors such as smoking cessation and reducing alcohol consumption. It is the employers responsibility to direct and encourage the employee to actively practice wellness at home and on-the-job, and provide incentives to do so. Insurance plans are beginning to cover more holistic wellness practices such as massage therapy, body-mind services and stress-reduction programs. These programs themselves have already begun to reflect an annual reduction in health care costs, employee missed work or sick days, and higher productivity in those companies. With the new regulations in place, it is imperative that employers focus on developing wellness programs that not only fit the requirements of the new rules, but also provide financial rewards to both the company itself and the employees reaping the value of these types of programs. Unfortunately, for small companies there are no one-size-fits-all wellness initiatives, so it is crucial that companies work with their benefit representative to find out what they can recommend when developing and structuring their plan. 

All in all, the health benefits landscape has changed. Proactive employers who encourage their employees to become more educated and take more responsibility for their health, wealth, and well-being will reap the benefits of a more sustainable, profitable enterprise that will always attract and retain a happier, more productive employee.