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 communication...it 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.