Health costs continue to rise, and because of that, employees are putting greater weight in employers that bear more of the costs of health benefits.  So, one of the largest challenges companies face when choosing an employee benefits package — other than the astronomical cost– is deciding how much of that cost the company should bear versus its employees.

The Kaiser Family Foundation Health Benefits Survey 2018 shows employees pay 17% towards employee-only coverage versus 28% for family medical coverage.  The cost for the company is $5,711 for employee-only coverage versus $14,069 for family coverage.  It’s a lot, but it can also make you more competitive in attracting great employees.

When creating your company’s strategy, give careful thought to these questions:

  1. How important are benefits in your company?  Your benefits package must be aligned with your company’s culture and values. If you are a mature company promoting family values, you know the additional cost of not just salaries but benefits, for example.
  2. How competitive is talent in your industry?   If you’re in a highly competitive industry, you may have to beef up your benefits to attract quality candidates.
  3. What is the average age of your employee?  If you have predominantly young, single employees, you’re looking at lower health benefit costs per employee.
  4. What are the net costs to the company after employee contributions?

There are also several potential modeling approaches to health benefit cost splitting:

  1. Stipend – This means that the employee pays a flat dollar amount you give your employee regardless of family status.
    1. Pros: The cost to the company is known with each employee.
    2. Cons: The employee with dependents bears much more of the cost.
  2. Tiered Stipend – This means that the employer pays a flat dollar amount that differs by single employee or married employee with spouse and/or children.
    1. Pros: The employee with dependents is additionally supplemented, reducing his/her costs and increasing employee satisfaction.
    2. Cons: The company bears more of the cost with dependent units. This increases the compensation package dramatically for that employee.
  3. Percent of Premium across all plans: This means that the employer pays a determined and specified percentage of the cost of the insurance premium for each employee
    1. Pros: Drives employees to plans that cost less.
    2. Cons: Usually a more expensive plan. Shifts cost burdens to employees and therfore, reduces employee satisfaction.
  4. Base plan with “buy-up” options: This means that the employer buys a lower cost benefits plan and allows employees to “buy up” to a better coverage plan at a higher cost.
    1. Pros: The company again can drive employees to lower costs plans. Also, the company can weight dollars more heavily to plans they prefer.
    2. Cons: More complicated to understand and use. Employees may not recognize the value of the benefit in their overall compensation plan.

Choosing the right employee benefits strategy is a complex process that requires time and a lot of patience.  If you want to do it right, choosing the right benefits broker can make all the difference.  A good broker –one who asks the right questions and listens to the answers–can save your company tens of thousands of dollars and, just as importantly, improve employee satisfaction, productivity, and retention.  There are strategies to analyze in these decisions that provide the best custom results for each employer.  Reach out to us to find out how the options affect your overall people strategy.  You can reach us at info@langfinancial.com.

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