What benefits should I offer my employees — and how much should I contribute?
I've gotten this question almost daily for years, so it makes sense to finally write a blog about it and help the few folks who may be doing some research of their own before approaching a broker.
Let's face the facts: in light of both legal obligations and your desire to have the best employees, offering health insurance is a given.
But most people are lost when it comes to how to structure their plans, which ones to offer, and how much to contribute to each. Not to worry — like most things relating to business, these questions are easy to answer with just a little insight.
How to Structure your Health Insurance plans
A good rule of thumb is to offer three health insurance plans: a base plan, and two additional plans that you can offer as "buy-ups" or higher-grade tiers that cater to different needs and preferences. Think flavors — they're not necessarily superior or inferior but can appeal to different requirements for costs and benefits.. Get a 30,000-feet perspective on the different types of plans here.
Ideally, you would offer an EPO (Exclusive Provider Organization) as your base plan. An EPO gives your employees access to a larger network than an HMO (Health Maintenance Organization), plus it requires no referrals. No frills, but a very solid foundation for employee health.
Your second plan would be a PPO (Preferred Provider Organization) or POS (Point Of Service) plan. Both offer out-of-network benefits which are a considerable perk.
For a premium tier, you might offer an HDHP (High Deductible Health Plan) which can also offer out-of-network benefits. An HDHP offers lower overall premium because you are paying the deductible upfront.
A mix like this one enables you to offer plans that meet everyone’s needs: an EPO gives you a solid, affordable base plan. A PPO or POS gives your employees out-of-network coverage if they need it. And an HDHP plan provides a lower premium and gives your employees the most flexibility.
So how much should I contribute?
It's ultimately up to you and how employee-friendly you want your benefits offerings to be: of course, the more you contribute, the more attractive your firm will be to good talent.
But on average: if you structure your plans like described above, you would contribute 50-80% of the single (no spouse/family coverage) rate of your base plan for all plans. That means employees taking a pricier plan would pay the difference; employees wanting to save money would choose a more affordable plan. Your bottom line would not be impacted either way.
For example: if your base plan single rate is $500, and you contributed 80% of that to all employees' insurance plans, both an employee taking the base plan costing $500 and an employee taking a "platinum" family plan costing $2,000 would receive $400. 80% of your base single plan is a contribution that will place you squarely in the middle in terms of employer contributions.
What does everyone else do?
The most important thing when setting up an insurance program is first deciding what makes sense for your budget and the talent you want to attract. Most companies offer the above three plans — more than that becomes a burden for you and your staff. If you've got a full-fledged HR department, maybe you'd like to offer more nuanced plans.
Most contribute 50-80% of their base single plan. Hedge funds, tech firms and other groups looking to attract smaller groups of premium talent will often compensate 100% of all plans.
If your goal is remaining competitive in the talent market while also turning a profit, Dinsmore/Steele's staff is an excellent resource to help you feel out the industry standards. We'll also show you your options for affordable meeting the average or exceeding it. The consultation is free — contact us and we’ll be happy to help you out.
