Budget-Friendly Insurance Options for Employers to Consider

Where is health care headed?  That would be anyone’s guess at this point. The implementation of the Affordable Care Act (ACA) has resulted in many years of debate. Some amendments have been made to the ACA along the way, but the principal elements of the law (the employer mandate and public option) have been resilient. While this activity occurs in the political realm, it has implications for all of us. 

 The core of the matter is that most people want health insurance, and the reality is that employer-sponsored plans are still usually the most cost-effective way to get comprehensive coverage. Therefore, employers have real power to make a difference in their employees’ lives with the coverage options they make available. 

Plan Design 

While legislators have tried to amend the ACA, the costs of health care continue to rise.  Health insurance is expensive because health care is expensive.  Due to modern medicine and advancements in treatment, humans are living longer and need expensive care for longer. 

Insurance, by its basic design, is supposed to cover the catastrophic expenses.  We understand that car insurance doesn’t cover flat tires or oil changes, but we want our health insurance to cover everything.  We think, “If I’m paying high premiums, why doesn’t it cover everything?” 

 If we step back and think about using insurance like a financial tool (to protect against the big risks while we budget for the small stuff), it makes sense to consider the High Deductible Health Plan (HDHP) Health Savings Account (HSA) plan design.  An HDHP is an insurance plan designed to cover higher-cost medical care and catastrophic expenses with lower premiums, but, as the name implies, with a higher deductible. Then you can use the HSA to pay for first dollar and health care expenses for which you can budget. 

 The HDHP is coupled with an HSA that can be employer-funded, employee-funded, or jointly-funded, and allows the employee to take their savings and put it in a tax-favored account in the employee’s name.  The unused dollars can be carried forward year after year, all the way into retirement to offset some of the high health care expenses we all may have in our advanced years. 

 An HDHP will not be a fit for everyone, but employees like choice, so this is a great option to add to your benefit program.  In addition, the costs associated with the HDHP will appeal to employees who traditionally have low health care costs. 

 

Benefits of High Deductible Health Plans (HDHPs)

Lower Premiums Because of the high deductible, these plans are usually less expensive than traditional insurance.  Consumer-Driven Healthcare Employees are responsible for the high deductible and so will have a stake in keeping their own costs low.  When combined with an HSA, employees view the money as their own, because it is!  Lower Administration Burden The administration burden is transferred to the employee and their HSA custodian, unlike FSAs and HRAs. The employee also gets more control over how money is spent and added to the account.  Tax Deductibility at Employee Level In addition to the pre-tax contributions made by the employer, employees also have the ability to make their own HSA contributions directly and still receive a tax deduction.

Another Benefit to Consider 

Many types of supplemental coverage are available.  Supplemental benefits are often provided on a voluntary basis, so employees can buy through their employers at lower rates, while the employer can choose to simply make the benefit available but not pay anything for it. 

 Disability Insurance 

Interestingly, disability coverage can be overlooked:  Most people don’t think about what would happen if they were sick or hurt and couldn’t work. A large portion of American adults live paycheck to paycheck. According to the Federal Reserve’s Report on Economic Well-Being of U.S. Households in 2022-May 2023, nearly 40% of Americans say they could not cover a $400 emergency expense using cash or its equivalent and therefore would need to pay via credit card or loan. About 62% of personal bankruptcies and half of home foreclosures in the US are due to a breadwinner getting sick or hurt and not being able to work (Council for Disability Awareness, July 2017). 

 The most common reasons for short-term disability claims are pregnancy, disease, musculoskeletal disorders, and injuries; the most common reasons for long-term disability claims are musculoskeletal disorders, injuries, cancer, mental health, and heart attack or stroke. 

 Disability coverage is very inexpensive compared to what we pay for medical coverage for employees.  In a 50-employee company, the total monthly premium for all employees, including coverage on the owners, is typically equal to what you pay for 2 employees’ monthly health insurance premiums. 

For More Information 

Employers are in a great position to help their employees mitigate risks and achieve their financial goals through the offerings available in their benefit plan. There are many options and compliance rules to consider, so making a choice about what to offer can be overwhelming. If you have questions, our team is here to help! For more information or assistance, please contact our Benefits team at (210) 640–1789, toll-free at 1–888–757–2104, or be******@gb**********.com.