Companies with fewer than 50 employees — especially those without a dedicated HR person — often struggle to obtain high-quality benefits support that provides reliable, transparent, and timely service at an affordable rate.
If you’re one of these organizations, you may wonder whether you should switch from employer-sponsored health benefits to individual benefits, in hopes of saving money.
Before you make the switch and disband your group health benefits altogether, ask yourself these five essential questions. They’re the same ones I pose to my clients when they’re faced with this dilemma, and they can help you think through the matter from all sides — and avoid making a hasty decision.
- Do you currently use benefits to retain and recruit employees? A great benefits package, which includes affordable employer-sponsored group benefits, is an important factor in retaining and hiring an educated, productive workforce.
- Have you considered the unintended consequences of disbanding your group plan? Under an individual benefits plan, the consequences affect both employers and employees. Employers will have to pay FICA, Medicare, and workers’ compensation insurance based on the amount paid to the employees for purchasing their individual plans because this amount now qualifies as compensation. In the meantime, employees will also have to pay income taxes on these dollars intended for individual benefits, which is normally a pre-tax deduction from their paycheck under an employer-sponsored plan.
- Do you know how the benefits dollars paid to employees are spent? Under an individual benefits plan, the employer loses control of how benefits dollars are spent by employees. Some employees may choose to spend the money on something other than health insurance, which can affect your productivity when those employees become ill and miss work because they are unable to pay for medical treatment.
- Are you aware that individual plan premiums increase at a higher rate than group plans from year-to-year? Because of this fact, employees can potentially end up asking for more money from the employer to help offset the increasing costs.
- Are you possibly creating a discriminatory situation by disbanding your group plan? If you decide to no longer offer group health insurance to your staff, and instead pay a certain amount to cover portions of their individual plans, you will likely face the challenges of how to fairly compensate the different segments of your workforce — the 24-year-old who is still covered by his or her parents’ plan, or the employee who is receiving benefits from his or her spouse’s plan. Do you not pay them anything because they are covered by another plan, or do you pay them the same amount you pay the rest of your staff who do not have health coverage? It’s a conundrum and potential liability most employers want to avoid altogether.
If you decide to keep your small group health benefits plan, it’s important to consider: how can you maximize your benefits, while positively affecting the bottom line? It takes specialized expertise, creativity, and market access to keep costs down without compromising care for your employees. This is where an effective health benefits advisor can help you create a comprehensive solution designed specifically around your organization’s needs. What qualities should you look for in an advisor? Consider the level of services the advisor offers, the years of experience, and the size and resources of the team assigned to your account.
A skilled health benefits advisor can provide invaluable services — and serve as an invaluable asset — for a small organization that lacks the experience, specialized expertise, or resources to manage its group benefits plan. As you search for the right fit, look for a strong track record of creating custom, cost-efficient solutions for clients.
If you’d like to discuss your group benefits or need help finding the best solution for your particular needs, please email me at ssines@psafinancial.com.
