Employers Explore Trimming Family Benefits to Offset Insurance Rate Hikes
Published in GSA Business
Written by Jordana Magonigal
It's nothing new that insurance rates continue to rise, but an effort to keep employees happy while at the same time remaining fiscally responsible has proven to be a challenge for most employers. More companies are cutting family benefits and many employees are taking on the full cost of family coverage, which typically runs over twice as much per month as the cost to cover an individual.
Small businesses often experience the biggest blow and are more likely to cut family benefits than their larger counterparts. Many will cover part of the employees benefit costs, but leave the additional amount to be covered by the employee.
Susan Crocker of Susan E. Crocker, Inc, Human Resources Consulting, has observed this trend as well. Family benefits, she says, can vary from the company paying all of family coverage cost to half, or nothing at all.
"In most companies they have made the commitment to take care of their employees' personal needs and coverage," Crocker says. "But with increasing costs of insurance, they leave family coverage up to the employee."
There are still advantages to keeping benefit coverage with an employer's group - namely, accessibility and affordability. Even if a company only pays half, it's still money that doesn't come out of the employee's pocket. And group coverage through an employer may actually end up with better rates, plans or deductibles.
According to a 2003 report by the U.S. Census Bureau, 15.2% of the nation's population (about 43.6 million people) were uninsured in 2002. Included in this percentage are those under employment-based coverage, which dropped from 62.6% to 61.3%. However, there are some solutions to the issue at hand and they are not necessarily financial in nature.
Actually, some of the best solutions have been the easiest to implement. For example, employees can look for (or request) a tiered plan which allows for different compositions of family coverage. A staff member may elect individual coverage, individual plus spouse, individual plus child or individual plus family as coverage options. Since insurance rates are dictated by the demographic composition, this is an easy way to save the employee money by not paying for dependents that don't exist (as one might with a standard family plan).
Also, legislation recently opened up limitations on prescription health care savings accounts. Under bill HR 4954, more families can apply for the tax-free savings to pay for medical costs.
Another option that has recently come to light will probably bring about major change in a relatively short amount of time - the debit card. The debit card works like a standard cafeteria or flexible spending account. An employee chooses his spending limit on medical and dental expenses for the year, and the fees come out of the paycheck. The limit is then set onto a debit card, which is available for medical spending - the same limitations on spending that you would see under a standard cafeteria plan.
Since establishing this system with her clients, Crocker has noticed a very positive response. One company noticed that participation in its flexible spending plan doubled.
"The debit card was a way to offer benefit improvement in a year in a very short amount of time," Crocker says. "It's the best thing I've done in a long time."