MEMBER BLOG: Supplemental Health Insurance

February 26, 2018

Jeff Harris | Business Benefits Consultant AFLAC Connecticut/RI
Why Supplemental Health Insurance is a Smart Investment for Small Business

In the unsettling health insurance markets of today, it is a significant challenge for small businesses to meet their employee’s health insurance needs while balancing the cost of providing coverage. Many small businesses cannot afford to provide major medical due to the high cost, even with employee contribution.  In a survey of companies in 2017, 10% of companies planned to increase employee copays, 18% planned increases to employee contributions, and 8% planned on increasing deductibles.  Additionally, 3% of companies were forced to move their plans to the government exchange.

In this case, employees must rely on the state insurance exchange to secure coverage for themselves and their families. Plans are expensive with rising deductibles and copays. In a recent survey, 65% of employees would be able to pay less than $1000.00 of out-of-pocket medical costs for expenses for an unexpected accident or illness. Furthermore, 45% of employees agree that they regularly miscalculate the cost of injury or illness including medical, household, and out of pocket expenses.  It’s important to remember, that if an employee is out of work due to illness or injury, the mortgage/rent, car payment, electric, gas and cable bills still need to get paid.

Increasingly, employers are becoming concerned with finding ways to better control benefit costs, managing workforce productivity, and recruiting and retaining the level of talent to achieve business goals.   In addition to wages, recognition and reward, benefits offered by a company are key component to job satisfaction and company loyalty.  Regarding benefits, 68% of employees believe that improving their benefit package would make them happier employees.  In fact, a significant percentage of employees believe that improving their benefits package is one way to enhance employee loyalty.  So how does an employer improve their employee benefit package without adding to the cost of benefits?  The answer is supplemental benefits.

Supplemental benefits are insurance policies that typically provide cash benefits payed directly to the employee for a variety of health concerns.  Some examples are accident insurance, short term disability, hospitalization, vision, dental and cancer policies.  Whole life and term life insurance policies are also available.  The cost of these policies is very affordable with some being as low as $6.00 per week.  Typically, these supplemental plans are 100% employee funded, although depending on the circumstances, they may be offered as full or partial contribution by the employer.

While providing enhanced employee recruiting and retention, supplemental benefit plans can also have positive financial advantages for employers.  There are several ways this can occur depending on how these plans are offered from a payroll standpoint.  If offered as pre-tax benefit plan (Section 125), employers can reduce their overall payroll tax liability by the reduction in total payroll dollars.   The employer can also save on Workman’s Comp premiums as they are based on total employee payroll.   If the employer decides to fully or partially fund the plan, these costs are tax deductible as a business expense.

It’s important to remember that supplemental benefits cannot and do not take the place of health care coverage.  However, they can provide needed benefits to employees as well as providing financial and human resource benefits to the employer.

Located in Stratford, Jeff Harris is a Business Benefits Consultant with AFLAC Insurance and a proud and active member of the BRBC.

For more information, email Jeff Harris via this link to BRBC Business Directory.