Making sense of today's employee benefit plans sticky

For most companies, employee benefits are the largest fixed expense after wages. For virtually all companies, this percentage is growing at an alarming rate.

In a recent study released by the Campaign Study Group/Pew Partnership for Civic Change, 39 percent of the adults surveyed said affordable health care is a serious concern.

Companies without benefits often suffer retention and recruitment woes, and are forced to live the old adage, "You must spend money to make money."

To help increase understanding of employee benefits, this article reviews some typical benefit plans, employer liability, employee responsibility, and other issues.

Fully-insured plans are the most common and are favored by a majority of employers, since these plans enable employers to budget expenses and limit financial liability. While it is true that you can lose money if the services you use cost less than the premiums, you also do not have the same risk as self-funded plans which allow you to keep some of the money. After all, insurance is something you buy to have someone else assume your risk.

Self-funded or partially self-funded plans are popular for large companies with over 100 employees or companies with high cash flows, such as attorneys and physicians. These plans only limit your liability according to your tolerance for risk. If you choose to assume more risk, the premiums are lower. Many agents and brokers believe that self-funding plans are not feasible for a company with fewer than 100 employees, and within some industries they only make sense for companies with 500 or more employees.

In a tight labor market, ancillary benefits are becoming more attractive, since they can give companies an edge over their competition with plans such as dental, disability, group life insurance and long term care. Group disability is an excellent benefit in relation to premium cost, because it offers protection to your employees' most important asset income. People insure their cars and homes, their lives and health, but often overlook income protection. Individual disability insurance is usually too expensive, but with a group it becomes very affordable. Offering disability as a benefit can help increase employee morale and decrease turnover.

Group life insurance is another excellent benefit for your employees. While some medical plans require the purchase of life insurance, it usually only provides a nominal amount of coverage. By offering up to $50,000 in life insurance as a paid benefit and an additional voluntary life plan, you can help your employees cover a risk that we all have. Studies show that most employees prefer to buy insurance through their employer because it is so affordable and can be done as a payroll deduction. These plans can be configured for a spouse and dependent children as well as the employee.

Sometimes people say, "My neighbor has this same insurance plan, and it is horrible!" It is important for employers and employees to be aware that a company's rates are based on the specific group and may not be the same as the neighbor's plan from the same insurance firm.

For instance, there are two health systems in Springfield and a multitude of insurance companies offering employee benefits. Each of these companies has an array of plans. Some have deductibles; some do not. Some cover prescriptions; some do not. Some cover family planning; some do not. Some even have the same name, but are very different in both price and benefits.

Because employers have many concerns about employee issues, it is important to rely on the agent for advice and consultation. Medical insurance rates will be the same whether the plan is purchased from Agent A or Agent B. The only exception would be if the agent has negotiated a special commission rate.

When you buy health insurance, the premiums include the agent's commission. The real decision-making consideration is service. Ask yourself these questions: Am I getting my money's worth? Does the agent call on me regularly? Is the agent responsive to my needs? Do I trust the agent's advice? Is my agent educating my employees about our plans and how to best use them? If you hesitate on any of these points, evaluate your situation.

Each employee in this country with access to health insurance provided by his or her employer is a very fortunate person. Health insurance is not a right, it is a privilege that must be honored and used wisely, or it will cease to exist.

The employee has the most at stake. It is important that each in a group practices healthy lifestyles, learn ways to reduce waste of health-care dollars and use benefits in a responsible, prudent manner. Employers also must know what to look for in an employee benefit package, what to expect from agents and what to expect from employees.

(Mike Scott is an account executive with the Barker Phillips Jackson employee benefits division.)