Can I Afford Employee Benefits?
Â Â Â Â Â Â Â Â Â Â Â The one area of small business that fosters more resentment from employees than any other is not having the protection of insurance if they are taken ill or become disabled.
Â Â Â Â Â Â Â Â Â Â Â As an employer you may want and need this protection for yourself and your family, but you assume it is out of each, when it is not.
Â Â Â Â Â Â Â Â Â Â Â Medical coverage, life insurance, profit sharing, dental and visual are the types of benefits you receive at a Fortune 500 company. These perks are an intrinsic part of the blue collar wage package that came about after World War II. But as a small business owner your revenues probably insufficient to allow you such a magnamaneous gesture as health care and life insurance. But even the smallest operation can get continuing health care coverage.
Â Â Â Â Â Â Â Â Â Â Â Health care spending by employers runs akin to walking hot coals, will you get to the other end without burning your feet? Today, you can, but you must do research into the programs that when chosen offer 50/50 co-pay. This is where the employer and employee each contribute 50% of the monthly premium.
Â Â Â Â Â Â Â Â Â Â Â Before we touch on the where and how, it is important that you understand the nuances of the Employee Benefit process.
Â Â Â Â Â Â Â Â Â Â Â “I’ve inquired and the premiums are just too high”
Â Â Â Â Â Â Â Â Â Â Â Health care is the most rapidly growing component of the employee compensation package. It has risen at an annual rate of 28%. Are the increases going to continue, it’s quite likely until legislation is enacted to establish a government health care plan.
Â Â Â Â Â Â Â Â Â Â Â The reason’s are very simple why costs are so high. A health care boom took place after the 1940’s when men and women were returning from the war. This era known as the Baby Boomer time was our second industrial revolution and also accounted for unprecedented growth in our population and in the response to specialized health care.
Â Â Â Â Â Â Â Â Â Â Â As the Baby Boomer generation reaches nearer retirement age, the actuarial tables used to measure trends in the majority population median age determine the costs of providing coverage. The Baby Boomer generation is a huge market and accounts for a full 65% of those insured. The increased chronological age also means increased health needs.
Â Â Â Â Â Â Â Â Â Â Â The number of companies offering benefits in America is not as many as you might think – only 60%. These companies have characters much like your own. They comprise small firms with less than 5 employees and often a husband/wife team at the firms helm.
Â Â Â Â Â Â Â Â Â Â Â Most small business owners would gladly offer benefits if it were available affordably. To the employer doing research they have found HMO’s, PPO’s, Planned Health Care, Medical Packages such as Blue Cross/Blue Shield. Where do you begin? We will first take you through the reasons for health care and what it is you are buying.
Â Â Â Â Â Â Â Â Â Â Â The decision for the employer to offer the employee benefits ia a giant step for the small mom and pop operation. This decision is one of the key’s in helping attract and retain better employees. This holds especially true when employees have families, the benefits are an added security net and its tax effective, as a group, medical benefits substitute pre-tax dollars for after-tax costs.
Basic Types of Coverage
Â Â Â Â Â Â Â Â Â Â Â Medical coverage is really the key area of the benefits package. Employees worry about being out of work due to illness than about the chance of death.
Basic medical coverage pays toward the following services:
- Hospital room and board
- Outpatient care
- Surgical fees
- Anesthetic fees
- Operating room, in-patient drugs and dressings
- Non-routine doctors exams
- Physicians hospital visits
- Emergency room treatments
- Those only cover high ticket areas – extended plans offer:
- Mental Health
Â Â Â Â Â Â Â Â Â Â Â Where do your priorities lie? Those paying for the coverage answer this and the most consistent trend is for the employer and the employee to equally share in the premium cost. In doing so the main concerns are met about affordable health care.
Â Â Â Â Â Â Â Â Â Â Â People are used to the comforts in America and of those comforts is the freedom to choose. When you are buying coverage be sure to elicit choices in the plans you purchase – how important is it – here are a few choices you take for granted:
- Freedom to choose or retain their current physician or hospital.
- Does the coverage require up-front payment, where the patient gets reimbursed weeks afterwards.
- Claim forms, deductibles, the old paperwork hassle.
- Preventative medicine.
- Employer administration.
Â Â Â Â Â Â Â Â Â Â Â Are you getting confused – it is a complex business and the more we understand it the better choices we make and questions we ask.
Â Â Â Â Â Â Â Â Â Â Â We speak of different types of plans, its like choosing different ice cream flavors there are so many.
Â Â Â Â Â Â Â Â Â Â Â Traditional Plans offer fewer benefits and the biller does the paperwork. The upside is the freedoms of choice offered the insured – better coverage – no.
Â Â Â Â Â Â Â Â Â Â Â It offers competitive major medical plans – where the insurer reimburses the insured and there is usually a tiered deductible procedure.
Â Â Â Â Â Â Â Â Â Â Â Alternative Plans are companies who have special deals with hospitals and physicians. This lowers costs and is basically comprised of two programs.
Â Â Â Â Â Â Â Â Â Â Â Health Maintenance Organizations (HMO) are arrangements between health care providers and customers in which preset fees are paid for coverage regardless of the treatment costs. This is an excellent choice because of the opportunity for preventative care.
Â Â Â Â Â Â Â Â Â Â Â Preferred Provider Organizations (PPO) these also provide agreements between providers and customers for a reduced fee per service not an overall set fee. Paperwork is minimal and the insured has choices in usage of services they pay for.
Â Â Â Â Â Â Â Â Â Â Â While the alternatives sound better remember the range of costs are not as flexible as traditional plans.
I’ll cover strengths and weaknesses in both areas.
- If you fall into a “high-risk” category as do martial arts businesses, you can usually get coverage where a commercial carrier will run screaming into the night.
- It is usually accepted by all hospitals and clinics
- A wide range of benefits
- Providers usually bill the insurer directly, relieving the burden of reimbursement and payment.
- After have poor administration and service
- Not licensed in all states
- Require more than 5 employees to quality for coverage.
- Efficient Administration
- Competitive rates
- One-step shopping
- Local agent you can deal with
- Higher costs
- Employees may be rejected due to health
- Rates fluxuate
- One-step health care service
- Broader benefits
- Few deductibles
- Preventative medicine
- Little paperwork
- Little freedom to choose physicians and hospitals
- Limited coverage area
- Increased liability – an employer can get sued when you limit employees choice of physicians and a malpractice claim occurs.
PPO’s: They fall under the same areas as an HMO but the employee has choice on services and costs.
You’ve got it – there’s more to think about!
Disability Coverage – This is really important and is normally purchased to cover a business owner(s). It is important that the company be able to continue the owner(s) income should a catastrophic event befall the business owner. And, if the person doesn’t see recovery on the horizon and this coverage allows for the co-owner(s) to have the resources necessary to buy the other person out.
Key Employee Disability Insurance – provides a monthly payment to help reimburse the business for the loss of services of a key employee other than the business owner.
Overhead Expense Disability insurance – if the owner becomes disabled this pays the business expenses such as:
- Water and sewer
Other expenses are also covered but not usually salaries. The services are 30-60-90 days after disability.
Workers Compensation – As a small business owner some states don’t require this if you don’t have at least 5 employees. I won’t go into coverage since it is a state-to-state variable.
Group Life insurance – This is determined by an employeeâ€™s age and amount of coverage. Some companies require the employee have a medical exam to show evidence of insurability.
If you’ve finally read through all these areas you’ll notice that becoming an employers has a lot of responsibility. The rewards are also great in the growth and stability your business will mature into.
Good shopping and read the fine print! Don’t be afraid to ask questions when you don’t understand something – it’s your money youâ€™re spending.