Employer Contribution Strategies
and Pitfalls to Avoid
Let’s now examine a few examples
and case studies of what would
be a good approach to determine
your Employer premium
contribution strategy.
Remember, there is no perfect
amount or method as each way has
its strengths and weaknesses.
Your Employer Contribution
policy should be re-examined
each year for adjustments based
on cash flow, premium rate
increases, and employee value.
Example #1: Let’s say you
have a three employees with
young families. All employees
are long time tenure status with
the company and are essential to
the daily operations of the
business. These are key people
who you can’t live without who
don’t make tremendous amounts of
money so they can’t afford high
monthly premiums or large
medical bills. They also use
their health insurance plan
frequently bacause they have
small children. In this
situation at minimum we
recommend you cover the majority
of the employee premium, perhaps
75%-100% and at least half of
the dependent premium. An
HMO plan might be an
excellent fit for plan choice.
Example #2 In this
situation let’s say you have
many low and mid-range salary
paid employees who are fairly
easily replicable with similar
talent. Employees are also of
vastly different ages and family
enrollment types it’s tough to
keep everyone happy and turnover
can be frequent. In this case
you’d want to consider either
defined contribution amounts to
control your cost to a specific
budget number or pay a large
percentage on the Employee
premium side and minimal
contribution to the
dependent premium side.
The mistake you’d
want to avoid is paying 100%
premium for both Employee and
their dependent enrollments.
The cost fluctuations between a
single employee enrollment and a
large family could be a thousand
dollars per employee. Many of
these dependents can be enrolled
on alternate group insurance
plans at little cost to the
employee, but it’s expensive to
an employee to have employees
with families enrolled with two
group insurance plans attempting
to coordinate benefits.
Example #3 You have a
standard mix of low, medium, and
highly paid employees who you
must offer health insurance
coverage to keep them on the
payroll. Your primary concern,
however, is controlling costs as
the bottom line is tight as the
economy has retracted. Your
first instinct is to utilize a
defined contribution strategy to
make sure you control your
Employer premium contribution
dollars. The hidden downside of
this strategy is that you have
key employees who are scattered
across the age and cost
brackets. You can leave key
employees with an inordinate
amount of out of pocket on
health insurance premiums which
can leave you with a key
employee considering quitting,
or quitting which is worse than
paying more out of company funds
for the benefits plan. A
balance of percentage splitting
is a better compromise on both
employee and dependent
premiums.
Getting the right Employee
premium contribution can be
difficult depending on your
exact situation. Even paying
100% of premiums is not the best
answer as employees will take
their health benefits for
granted. With help from a good
California health insurance
agent we can find you the best
solution for your needs.
Other
important
resources:
California
Small Group
health quote
California
Small Group
online
doctor
listing
California
Group
Enrollment
and
Eligibility
Center
