Do You Have the Right Insurance Lined Up to Offer to Your Employees?

In today’s post-pandemic business world, providing the right insurance options is crucial to both employers and employees.

“These days, one of the biggest benefits of full-time employment is eligibility for the employer’s group health insurance plan. And as healthcare reform continues to evolve and affect individuals’ and families’ lives and finances, group health coverage through an employer becomes an increasingly valuable perk,” says The Hartford.

For employers, offering the right insurance and benefits packages can help them remain competitive in a historically tight labor market.

A 2022 MetLife Study, for example, showed that health insurance is the most prized job benefit with 79 percent of workers calling it a “must-have.” Close behind health insurance were other key insurance and benefits offered by employers that are considered “must have: by employees:

• 401(k) or other: 75 percent
• Dental insurance: 73 percent
• Vision insurance: 70 percent
• Life insurance: 63 percent
• Disability insurance: 60 percent
• Defined benefit pension: 57 percent
• Critical illness insurance: 51 percent
• Health Savings Account: 51 percent

The EBRI 2023 Workplace Wellness Survey backs up those numbers with 70 percent of employees saying health insurance is the most important factor in deciding whether to stay in their current job.

The Hartford says key employee benefits of employer-sponsored health coverage include reduced absenteeism, increased retention, a boost in employee satisfaction, and an advantage in recruiting top talent.

The Business Case for Providing Insurance to Your Employees

Employer-provided insurance for employees typically focuses on the benefits to the workers, but there is a real business case to be made for the benefits to employers for offering insurance.

“Employers may want to offer coverage because offering a compensation package composed of both wages and health insurance is more profitable than providing wages alone,” writes Ellen O’Brien in The Milbank Quarterly: A Multidisciplinary Journal of Population Health and Health Policy.

O’Brien cites the following employer advantages to offering insurance and other benefits to employees:

• Employers might benefit from providing health insurance if it allows them to recruit and retain high-quality workers.
  
  
• Employees who demand health benefits might have other qualities that employers value.
  
  
• By offering health insurance, employers could attract employees who anticipate establishing a long-term employment relationship.
  
  
• Firms might also provide health insurance if health insurance improves workers’ health, by increasing their productivity at work and reducing absenteeism and turnover.
  
  
• Workers in “good jobs” are happier and more productive.
  
  
• Rather than having only some workers insured or having wide variation in the extent and quality of coverage—as would likely happen if workers were left on their own to purchase insurance—employers could benefit from having all or most of their employees covered under plans with standard minimum benefits.
  
  

Another important reason for employers to offer insurance is the tax treatment those benefits receive.

“Although employees pay income tax on their wage earnings, the portion used for health insurance is not taxed as income, and payroll taxes do not include the amount paid for these benefits. And if their employers arrange for it, employees can also pay their share of the insurance premium out of pretax income. Indeed, the tax advantages for employment-based coverage are significant,” concludes O’Brien.

Glossary of Common Terms Associated with Employer-Offered Insurance

When contemplating the right health insurance to offer your employees, it can help to understand your PPOs from your HMOs from your POSs ... the field comes with a lot of specific terms.

Here are some common terms associated with employer-offered insurance:

• 401(K) plans – A retirement savings plan that’s offered by employers. Employees can contribute a percentage of their salary into a long-term investment account through automatic paycheck deductions. Employers often match all or part of their employees’ contributions.
  
  
• Cafeteria plan - A flexible benefits plan that allows employees to choose from a variety of benefits, such as health insurance, dental insurance, vision insurance, and childcare assistance.
  
  
• Carrier – An insurance company.
  
  
• Coinsurance - A percentage of the cost of a covered service that the insured pays after meeting their deductible.
  
  
• Coordination of Benefits - The process of determining which insurance plan will pay for a covered service when the insured has multiple insurance plans.
  
  
• Copay – A fixed amount that the insured pays for a covered service.
  
  
• Deductible - The amount that the insured must pay out of pocket before the insurance plan will start paying for covered services.
  
  
• Dental indemnity - A type of dental insurance that pays a fixed amount for covered services, regardless of the actual cost of the service.
  
  
• Dental Maintenance Organization – A DMO plan requires you to select a primary care dentist as well as receive all dental care within the plan's network.
  
  
• Dependent - A spouse, child, or other relative who is covered under the insured's health insurance plan.
  
  
• Employee benefits - Non-wage compensation provided by employers to employees, such as health insurance, dental insurance, vision insurance, and retirement savings plans.
  
  
• Employee vision insurance - A type of insurance that covers the cost of eye exams, prescription glasses, and contact lenses.
  
  
• Explanation of Benefits (EOB) - A statement from the insurance company that shows how they processed a claim and how much they paid.
  
  
• Fixed Annuity - A fixed annuity is a type of insurance contract that promises to pay the buyer a specific, guaranteed interest rate on their contributions to the account.
  
  
• Flexible spending account (FSA) - A savings account that allows employees to set aside pre-tax dollars to pay for qualified medical expenses, such as deductibles, copays, and coinsurance.
  
  
• Health maintenance organization (HMO) - A type of health insurance plan that provides coverage for a set of specific services from a network of providers. HMOs typically have lower premiums than other types of health insurance, but they may have more restrictions on the care that members can receive.
  
  
• Health savings account (HSA) - A savings account that allows employees to set aside pre-tax dollars to pay for qualified medical expenses, such as deductibles, copays, coinsurance, and prescription drugs. HSAs can only be used in conjunction with a high-deductible health plan (HDHP).
  
  
• High-deductible health plan (HDHP) - A type of health insurance plan that has a higher deductible than other types of plans, but lower monthly premiums. HDHPs are often paired with HSAs to help offset the cost of out-of-pocket medical expenses.
  
  
• Index annuity - An index annuity offers investors solid but varying growth with a low risk.
  
  
• In-Network - Doctors and hospitals that have a contract with an insurance company. Members of an insurance plan typically pay less for services from in-network providers.
  
  
• Key Life Insurance – Protects a company from financial loss from the death of a vital employee, often a director, shareholder, founder, or other key employee.
  
  
• Long-term disability insurance - A type of insurance that provides income to employees who are unable to work due to a disability for an extended period of time.
  
  
• Medical savings account (MSA) - A type of HSA that was available before 2007. MSAs are no longer available for new enrollees, but those who already have MSAs can continue to use them.
  
  
• Out-of-network - Doctors and hospitals that do not have a contract with an insurance company. Members of an insurance plan typically pay more for services from out-of-network providers.
  
  
• Participating Dental Network (PDN): A PDN or PPO plan lets you choose dentists in or not in your network, but selecting a provider within your network plan will be less expensive.
  
  
• Point-of-service plan (POS) - A type of health insurance plan that combines features of HMOs and PPOs. POS plans typically have lower premiums than PPOs, but they may have more restrictions on the care that members can receive.
  
  
• Preferred provider organization (PPO) - A type of health insurance plan that allows members to see any doctor or hospital, but they will pay less for services if they see providers within the plan's network. PPOs typically have higher premiums than HMOs, but they offer more flexibility in terms of the care that members can receive.
  
  
• Premium - The amount of money that the insured pays for their insurance coverage.
  
  
• Prescription drug plan (PDP) - A type of insurance plan that covers the cost of prescription drugs. PDPs can be purchased as a stand-alone plan or in conjunction with a health insurance plan.
  
  
• Provider -  A doctor, hospital, or other healthcare professional.
  
  
• Short-term disability insurance - A type of insurance that provides income to employees who are unable to work due to a disability for a short period of time, typically less than six months.
  
  
• Term life insurance - A type of life insurance that provides coverage for a specific period of time, such as 10 years, 20 years, or 30 years. Term life insurance is typically less expensive than other types of life insurance, but it does not build cash value.
  
  
• Universal life insurance - A type of life insurance that offers flexibility in terms of premiums and coverage. Universal life insurance policies can build cash value, which can be withdrawn or borrowed against.
  
  
• Variable annuity - A variable annuity allows the flexibility to pay interest that can fluctuate based on the performance of an investment portfolio chosen by the account's owner.
  
  
• Variable universal life insurance (VUL) - A type of universal life insurance that invests a portion of the policy's cash value in stocks and bonds. VULs offer the potential for higher returns, but they also come with more risk.
  
  
• Wellness Benefits - Benefits that are designed to help employees stay healthy, such as gym memberships and on-site health screenings.
  
  
• Whole life insurance - A type of life insurance that provides coverage for the insured's entire life. Whole life insurance policies build cash value, which can be withdrawn or borrowed against.
  
  

Best Practices for Choosing the Right Insurance for Your Workers

So, it’s no secret that employers need to offer insurance and other benefits to their employees but selecting the right insurance for your employees can be a daunting task.

Some of the best practices for choosing the right insurance for your employees include:

1. Understand Your Budget: Before diving into the details of different insurance plans and benefits, it's essential to have a clear understanding of your budget. Determine how much you can allocate to employee benefits while keeping your business's financial health in mind. Balancing your budget helps you choose insurance options that meet your employees' needs while staying within your means.
2. Know Your Workforce: Different employees have different needs and preferences. Understanding the demographics of your workforce is crucial. Young, single employees may have different insurance priorities compared to older employees with families. Consider surveying your employees or conducting focus groups to gain insights into their preferences and requirements.
3. Types of Insurance to Consider: Familiarize yourself with the different types of insurance including health insurance, dental and vision insurance, life insurance, disability insurance, retirement plans and others.
4. Seek Professional Advice: Choosing the right insurance for your employees can be complex. Consider consulting with an insurance broker such as Dean & Draper who can help you navigate the options and customize a benefits package that aligns with your business's needs and your employees' preferences.
5. Legal and Regulatory Compliance: Be sure to stay informed about the latest legal and regulatory requirements regarding employee benefits. Compliance with laws such as the Affordable Care Act (ACA) is essential to avoid potential legal issues and penalties.
6. Communication and Education: Once you've selected the right insurance plans, effective communication is key. Employees need to understand their benefits, how to use them, and when open enrollment occurs. Invest in employee education and provide resources, like benefit guides and FAQs, to ensure they make the most of their benefits.
7. Regularly Review and Update: Your employees' needs and the insurance market can change over time. Periodically review your benefits package to ensure it remains competitive and relevant.

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