157,000,000 Million Americans
157,000,000 million Americans get their health insurance from their employer. It’s a complicated industry, it’s expensive, it’s forever changing with regulation from numerous governing entities and it’s downright confusing.
Here are a few ways you – the business owner – can save money.
1. Work with an experienced and qualified employee benefit broker / consultant.
2. Know your expectations and reasons for offering an employee benefit package.
3. Plan Design.
4. Funding strategy (employer contribution).
5. Educating your employees.
6. Managing employee expectations.
An Experienced and Qualified Employee Benefit Broker
As my father always used to say… Nothing can take the place of experience. A qualified employee benefit broker will know things like (pure example) what insurance company has more money in reserves which will lead to lower rates. This person will have established relationships in the industry which will in turn benefit you during periods of negotiation etc.. The list goes on. Bottom line, Experience matters.
Know your Expectations and Reasons
A qualified benefit broker will help you understand why you’re offering benefits and what benefits to offer. As an example, we have clients that offer the bare bones minimum to get by (they have their reasons for it) – and then there are businesses that offer the richest plan possible. What is your reason/purpose for offering health insurance? Align your goals and expectations with the level of benefits you offer.
So much goes into this – it warrants its own blog. Until I get to that, here are the highlights. Plan design includes aspects like deductibles (Lower deductible = Higher Premium). Plan design also relates to the type of insurance; Fully Insured or Self-Funded.
With self-funding comes more flexibility on plan design. Example: there can be caps, limits or restrictions on certain services (where allowed by law) – meaning a certain benefit can only be used a set amount of times per year (capping your risk = lower claims). Designing your plan to fit your needs, wants and employee expectations is vital.
Funding Strategy (Employer Contribution)
Most employers contribute to the overall cost of the health insurance plan. We call this the employer contribution strategy.
Example: The healthcare plan cost $400 per employee (total monthly premium). The employer might contribute 50% per employee who enrolls. The other $200 is deducted from the employee’s paycheck.
If 50 employees enroll:
$200 (employer contribution) X 50 (enrolled employees) = $10,000 Monthly Spend for the Business Owner. That is not including other benefits like dental, vision, paid time off etc. A complete employee benefit package can be expensive.
Offering different plans – a high plan and low plan – and structuring different employer contributions per plan is a strategy used to save money. Further, once you have a year or so under your belt you then have historical data to analyze and see what plans most employees enroll in.
Classes – You can class out different employees. Example, we have a client that has three different classes of employees. Executive, Management and Production. Each class has a different employer contribution strategy.
Educating Employees on How to Use Their Health Plan
I read a stat once that went like this… People spend more time researching what T.V. to buy than what healthcare plan to buy. We know it’s not easy but educating the employee on not only what healthcare plan to enroll it, but HOW TO USE IT is vital. Utilization leads to claims and claims directly impact renewal cost.
Example: Most healthcare plans come with telemedicine. Telemedicine is great for common conditions you would want to speak to a doctor about. Telemedicine keeps claims low which directly impacts your renewal cost.
Example: Procedures like diagnostic imaging (X-rays, CT scans and more) can usually be done at many different facilities. Knowing which facilities have cheaper costs can save the plan a lot of money over the long term. This responsibility ultimately falls on the employee.
Employee expectations are huge. An executive making $235,000 a year has different expectations and a different budget than someone making $35,000. You should talk to and have an open conversation about this with your benefit broker when structuring your overall benefit package.
This blog is designed to provide some high level information and talking points. At Fortis Life Group we always want to give you the resources necessary to make informed decisions. When was the last time you had an expert review your group healthcare / benefits strategy?
My name is David Johnson | Founder of Fortis Life Group. I’ve been doing group benefits for 10+ years and always enjoy talking to business owners about healthcare and benefits. It’s my jam.