The one constant in healthcare today is increasing costs. According to data from Kaiser, premiums have increased 50% over the past eight years with family plans reaching an all-time high of $18,142 for the year in 2016. The good news is Ancillary Benefits Fill Benefits Gaps.
Employees love dental and vision products, they are the second and third most requested employee benefits. Research continues to show that dental and vision plans can be effective preventive healthcare tools that may lower medical claims costs overall. Early symptoms of high blood pressure, diabetes and other diseases can be detected in an eye exam before showing up in a physical. Life insurance can help employees protect their loved ones by providing a monetary benefit to cover the cost of a funeral or a debt health insurance also does not provide income protection in the event of a death.
Voluntary benefits as an industry has increased 257% over the past twenty years, with the greatest growth in the past five years coming specifically from supplemental health benefits such as accident, critical illness, cancer, and hospital indemnity insurance. These benefits can all provide employees with a cost effective way to fill in the holes created by high deductible health plans by paying first dollar benefits directly to employees upon diagnosis or occurrence of medical events. By making these benefits available at the workplace, employees gain access to more affordable rates and waived or simplified underwriting not available to them individually as well as the convenience of payroll deduction and often the added perk of portability.
Ancillary benefits are affordable, too. Purchasing these benefits at a group level is more affordable than if purchased on an individual basis. Cost is limited for three reasons:
- As group insurance products, the risk is spread through a large population, which keeps premiums reasonably priced.
- If your business takes advantage of Section 125 of the IRS code, premiums are paid with pre-tax dollars.
- The cost can either be completely covered by the employer or shared with the employees by arranging an employer-employee split.
There are two ways ancillary benefits can be funded: voluntary or employer-contributory. On employer-contributory ancillary benefits, the employer usually pays 50 to 100 percent of the premiums. On voluntary plans, the employer may contribute 0 to 49 percent of the premiums.
Through payroll deduction, employees pay whatever portion of the premiums that the employer does not cover. Then when an employee uses their benefits, a claim is submitted and benefits are paid directly to the network-contracted provider or to the member (if a network provider is not used). For life insurance claims, the beneficiary is paid directly (in the event of a death).
There are many reasons why an employer may contribute more or less of the cost of an ancillary benefit. Companies may only cover the full cost of their health plan, and let employees choose to purchase a voluntary dental or vision plan. Others may find that offering employer-contributory ancillary plans encourages more employees to enroll.
There are several benefits for employers and employees when choosing to add on ancillary benefits.
- Lower employer FICA contributions if your business takes advantage of Section 125 so that employees can use pre-tax dollars for these benefits
- The value of ancillary benefits is high among employees and would enhance the employer’s reputation among employees.
- Offering ancillary benefits make your business more competitive in the employment marketplace. With them, you can compete with other employers who may already provide these value-added benefits.
- Employers do not pay for voluntary ancillary benefits or can share the cost with employees to keep costs down while pleasing employees.
- They can use pre-tax dollars to pay for ancillary benefits, thus lowering their taxable income.
- The cost is affordable. Risk is spread among a large group of people to keep the premiums reasonable.
- Ancillary products respond to workers’ needs to access important benefits, such as dental insurance, vision insurance and group term life insurance.
- With ancillary dental and vision benefits, workers can get preventative care, not just care when a problem develops.
- They can enjoy the peace of mind and security that comes with ancillary benefits and group insurance.
With 77% of workers saying the benefits package is an important factor in their decision to accept or reject a job, and with 70% of employers today offering voluntary benefits as part of their total benefits package, employers in 2017 would be at a clear disadvantage to not be offering voluntary benefits to their employees. (EBRI, 2015) (LifeHealthPro, 2014) Voluntary supplemental health benefits can help fill the gaps created by changing medical plan designs, meet the needs of an ever-increasing diverse workforce, and attract and retain top talent – all at no cost to an employer’s bottom line.
For more information regarding ancillary benefits, please contact us today.