Pink Slips or Green Backs?

Mark Roberts

Sep 1, 2011

Many business owners are focused on the bottom line. Are they going to make a profit? Will their company still be in business this time next year? Will the employee base be increased, or is the HR Director loading more pink paper into the printer? These questions and more are faced each day by executives, and CEOs and their managers better know the answers. Or at least, they should be aware of the consequences and have solutions to fix the problems.

Business owners should also know what their employees need and want to keep them employed when it comes to benefits. Key to this is having great communication with workers and your support staff. Also, being aware of new services in the benefits world helps employers to evaluate potential savings for health care. Voluntary benefits serve a critical role in the mix when it comes to analyzing, planning, and implementing a plan that not only keeps your employees healthy, but also aids in keeping your company in sound financial shape.

Everyone, and every business, is looking at how to reduce costs. Cutting costs may be a concern in the current economy, but as businesses start to recover they will need to attract and keep talented employees. One solution is to offer voluntary benefits along with a medical plan. Voluntary plans can enhance a benefits package without adding cost to the employer and still offer employees highly valued benefits.

Paying for a full range of employee benefits may not be feasible or appropriate for your company. Voluntary benefits are simply additional benefits available to your employees on a voluntary basis. A variety of coverage can be added to your plan including dental, short and long-term disability, life insurance, and long-term care. Voluntary benefits provide many advantages to both you and your employees. Employees can still purchase benefits they need and save money on premiums as compared to purchasing individual coverage.

In 2009, the American Journal of Medicine reported that nearly 62 percent of all bankruptcies in 2007 were caused by medical expenses, and 75 percent of those who declared medical bankruptcy reported having health insurance. Even with health coverage, many employees quickly deplete their savings and file for bankruptcy when battling disease or debilitating trauma. They don’t have enough money saved to pay deductibles and co-payments, and their earnings decrease as their daily living and medical expenses increase. Plus, as much as two-thirds of all costs related to critical illnesses and accidents are non-medical, including transportation to and from treatment, medically necessary renovations to a home or family lodging and meals purchased during an individual’s hospital stay, according to Agent’s Sales Journal.

There’s even more value for employers: With voluntary benefits, employers can offer more coverage to their employees without the added expense of the benefits themselves, or of additional payroll taxes. And instead of basing rates on employer contributions, rates can be based on participation — the more employees enroll in the program, the less premium each employee pays. It’s pretty simple math, and it can help employees stay more protected both physically and financially.

Also, employees can pay for their voluntary benefits through payroll deduction and elect to run qualified premiums through your flex plan to save money, such as a Flexible Spending Account (FSA). Offering voluntary benefits serves you well, too. You can reduce your employee benefits costs and provide valuable benefits to your employees. Plus, by offering a flex plan to help employees pay for voluntary benefits, you will reduce your social security and Federal unemployment tax costs.

Another option is available if your company offers major medical coverage with a high deductible plan combined with a Health Savings Account (HSA). Employees save money with lower premiums, and they use pre-tax money to pay for medical expenses. Plus, HSAs don’t have a “use it or lose it” clause. Those monies can be rolled over and can be invested. Make sure you talk with your tax counsel before making any major moves, but this type of health care arrangement saves you and your employees money. They just need a little education on how it all works and to boost their comfort level on HDHP plans.

Additionally, your employees can save even more money by combining these financial vehicles with discount dental and health plans. Typically very inexpensive, a discount plan functions as a membership and provides access to immediate savings with participating network providers—savings of 20 to 60 percent are realistic. Employees can use them together and stretch their money sometimes twice as far as they normally would when paying out of pocket for medical expenses.

Companies like United, Careington and Aetna have great discount dental plans. Considering dental is the number one requested benefit after medical, it makes sense to offer one of these to your employees for the following reasons:

Discount dental and health networks allow for members to access participating network providers with reduced fee services.
Discount dental and health networks can be used by self-funded companies to reduce the cost of claims.
Discount dental and health networks provide instant savings for health care services – stretching the HSA/HRA/FSA dollars.
Members can use discount dental and health networks for qualified medical expenses.
Employers can offer employees discount dental and health networks for additional health care savings – employees save on out of pocket expenses.
Employees can have anyone in their household participate with the discount dental and health networks – even those who do not qualify as part of their health plan and HSA/HRA/FSA.
Employees can participate on a voluntary basis, or on a non-voluntary basis with a “baked-in” suite of dental and health products.
Retirees can use discount dental and health networks as part of an extended retirement package offered by employers.
Employees that do not qualify for insurance can be offered discount dental and health networks—part time, ineligible, etc.
Discount dental and health networks can be used nationwide when employees are traveling.
Both Employers and employees save money when accessing discount dental and health networks.

HSA owners tend to have lower medical expenses. This results in lower health insurance premiums and lower rate increases. Why is this? HSA owners are paying for their own doctor visits and prescription drugs until they have met their deductible. They are more interested and involved in their treatment, questioning the cost and necessity for medical procedures. Also, they take better care of their health, knowing that being overweight, or smoking, or not exercising is bound to be very costly to their own financial future. HSA owners also tend to have more money in the bank. They know enough not to pass up the immediate tax deduction of HSA contributions. They certainly don’t want to pass up an opportunity to start a tax deferred investment account especially if the money can be used to cover medical expenses. Combining discount health care with a pre-tax payment vehicle is a perfect blend of fiscal responsibility and health care.

More importantly, offering voluntary benefits to your employees strengthens the relationship with them by showing that you care they stay healthy. According to BusinessInsurance.com, employers have recognized that under health reform, more than ever, the investment in human capital is what they need to be looking at as opposed to thinking of benefits as just an expense of doing business. A recent survey also found that when it comes to communicating information to employees, 52 percent are educating employees about how the PPACA affects their benefits; 36 percent are describing what they, as the employer, plan to do; and 35 percent are explaining to employees what's contained in the new health care law.

At the end of the day, business owners have two colors of paper to recognize—pink, for employee dismissal, and green for money in the bank. Certainly, when employees have to be let go because the company is losing money and can no longer afford to keep them, that’s a painful scenario. It’s tough on everyone. However, if the business is profitable, it can afford to expand and hire more workers. That’s a green company. There are plenty of options. Choosing the right blend of health care services, insurance components and voluntary benefits for a comprehensive plan design helps employers focus on managing expenses, keeping great employees, offering great customer service, selling valuable products and staying in business.

About the Author:

Mark Roberts’ professional sales background includes 30 years of sales and marketing in the tax, insurance, and investment markets. Mark is a licensed life, health and accident insurance agent in all 50 states and DC, for insurance products, and discount health plans. He serves as Manager of National Accounts at Careington International ( www.careington.com ). Additionally, Mark has been writing a health care blog for the past 3 years, found at www.yourbesthealthcare.blogspot.com , which is a topical weblog about various health care issues. He also regularly contributes articles to magazines for both medical and dental topics both in the US and the UK. You can reach Mark at markr@careington.com.