A Robust Benefit Package Can Set You Apart from the Rest (and Not Hurt Your Bottom Line)

Employee benefit renewal season is in full swing once again. While employer groups around the state renew benefits every month of the year, the fourth quarter for a January 1 effective date is the busiest season for open enrollment. Here at Lakeshore Employee Benefits, 25 percent of our group clients renew on January 1. It’s crunch time for agents, insurance carriers, and of course, many of our wonderful clients.

Benefits are a vital component to attract, incentivize and retain employees. As you continue, and wrap up, assessing your benefit packages, consider the following information to help you make the most informed decisions. The goal is to provide a robust employee benefit package, while keeping your bottom line in check.

Health Insurance

Health insurance is the most commonly provided employee benefit, as well as the most expensive. Michigan has been noted as one of the least competitive health plan markets in the nation. Over 80 percent of employees have one of three carriers (Blue Cross Blue Shield, Priority Health and Blue Care Network).

Below are some options that might help reduce your premiums compared to traditional plans.

A Wellness Component: If the employee agrees to do a few things (stop smoking, preventative health screenings, etc.), they can receive a plan with lower out-of-pocket cost and deductibles, or maybe even lower a premium. These drive premium savings for the employer and employees (around 10 percent).

Reduced/Narrow Network: Many carriers offer plans with a reduced or narrow network of providers. Maybe the network restricts your employees from using one hospital system and requires you to use another. Sometimes the narrow network is just narrowed for primary care physicians. Savings on narrow network plans vary but run in the 8-10 percent range.

High Deductible or Reimbursement Arrangement: High Deductible Health Plans (HDHP/HSA), combined with a tax-free Health Savings Account, can help pay claims. Health Reimbursement Arrangements (HRA), where the employer buys a plan with a deductible higher than they want their employees to be on the hook for, allows the employer to pay employee out-of-pocket claims at a pre-set point. Both HDHP/HSA and HRA plans provide premium savings compared to traditional plans.

Virtual Visit: Our industry has seen an increase in the use of virtual visits since COVID. Who wants to sit in the doctor’s office next to sick people, right? There are now health plans offered that are based on virtual visits. Mental health has been one of the fastest growing health needs, and virtual visits can be perfect for these services.

Premium Funding Options

There are three main ways to fund your premiums:

1. Fully insured—the insurance carrier carries all the risk
2. Level Funded—Depending upon set-up, the insurance carrier holds the risk, or it can be split between the carrier and employer. At year end there may be a refund to the employer, or the employer may owe money back to the carrier.
3. Self-Funded—the employer buys a large deductible policy on each employee ($50-$100K or even larger). The employer pays all the claims until an individual reaches the deductible selected, then the insurance steps in and pays further claims.

Ask yourself how you feel about these options, and what will most incentivize potential or current employees? Keep in mind that one of the risks is you could be over-paying for the comfort and simplicity of being fully insured.

Life Insurance

Most employers provide some term life, because it’s a valuable benefit and very inexpensive. Common amounts are $25K, $50K or a multiple of earnings. If you offer more than $50K there is an imputed income calculation that needs to be done and the value needs to be added to the employees W-2.

Sometimes the amount is determined by class of employee (e.g., salary/hourly, non-union/union, full-time/part-time). Many employers allow employees to buy additional coverage at the employees’ expense.  This employee paid coverage is “portable,” meaning if the employee leaves, they can take this additional coverage with them. This time of year is ideal to reassess employee policies, including reviewing coverage and confirming the beneficiary.

Disability Insurance

One of the most important yet often overlooked coverages is Disability Insurance. National statistics show the odds of becoming disabled during your working years far surpasses the odds of passing away during the same time frame. Employers can protect and incentivize their employees by providing short and/ or long-term disability coverage.

A typical benefit is 60 percent of the pre-disability earnings. This benefit is taxable if paid for by the employer resulting in approximately 40 percent income replacement, which is not enough for most people.

Many clients (including our agency) have supplemented their group policy with additional individual coverage resulting in up to 75 percent income replacement. We’re often able to set up the plan to provide these benefits tax-free. Offering this insurance has the potential to set you apart as an employer.

Dental & Vision

I lump these two together because they are not true protection products like Medical, Life and Disability Insurance. Dental & Vision plans can produce significant savings on teeth cleanings, oral exams, vision exams and materials like frames, lenses and contacts. The discounts carriers (Delta Dental, VSP and others) have negotiated are significant. If you get your teeth cleaned or wear glasses/contacts, you will save money versus paying out-of-pocket. Remember, Dental & Vision care is a key part of overall health maintenance, and a great way to round out an employee benefit package.

Health insurance carriers typically require the employer to pay at least 50 percent of the employee-only premium rate, but the rest of these core benefits can be provided on an employer pay all basis, employer/employee split or the employee paying 100 percent of the cost. Additional Life, Dental & Vision are often set up as employee pay all, which is a great way to strengthen your benefit offerings without adding additional cost to your bottom line!

There are a lot of other popular benefits we see employers offering.  Retirement Savings Accounts, Accident & Critical Illness (think AFLAC, but they are not the only option), Pet Insurance, Pre-Paid Legal, Identity Theft, Flexible Savings Accounts, Dependent Care Accounts, Lifestyle Savings Accounts and many more. Our goal here at Lakeshore Employee Benefits is not to load-up clients with unneeded products/services, but rather to help determine which benefits are most meaningful to their employees.

As you finish up evaluating your current employee benefit packages, keep front of mind what will help retain employees and what will make your business most attractive to new talent. Having a solid, secure package in place ensures greater appeal, and with a little work and creativity, your bottom line won’t feel the pinch.

I trust your company will have a great end to the year. Then on to 2024! We will be all over the state serving clients the next few months, but please reach out to us if you need assistance or have any questions. Partnering with insurance agencies provides small business owners with additional benefits, and helps navigate the complexities of insurance and human resources.

By Shannon Enders; originally published in SBAM’s November/December 2023 issue of Focus magazine

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