Voluntary benefits cover expenses not paid for by traditional health insurance. Voluntary benefits include disability, accident, critical illness, cancer and supplemental health insurance and cover expenses such as loss of income, travel to treatment centers, child care and the like in the event of unexpected illness or injury.

With the rising cost of health insurance, voluntary benefits are becoming more popular for both employers and employees.

Voluntary Benefits from the Employer’s Point of View:

• Employers can offer their employees more comprehensive coverage.
• Since voluntary benefits are 100% employee paid, there are no additional costs to the employer.
• The employer’s payroll taxes may be reduced if the employee’s contribution is paid with pre-tax dollars.

Voluntary Benefits from the Employee’s Point of View:

• Employees don’t have to use their savings while recovering from an unexpected illness or accident.
• Benefits are paid directly to the employee when they need them.
• Premiums for the voluntary benefits are based on group rates and so are lower than if the employee purchased the coverage on an individual basis and are typically just a few dollars per month per plan.
• Employees can save on payroll taxes in many cases because the premiums are paid with pre-tax dollars.

Thus, voluntary benefits are a good idea for both employees and employers and is something that you should consider.

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Employer Profiles & Group Insurance Benefits

Recent research has shown that employers fall within four key profile types when it comes to choosing group insurance benefits. The research looked at how benefits are optimized and how each profile type maximized the return on the cost of these benefits.

The data gathered included employer attitude about the benefits they offered and how the costs of these benefits were funded.

Based on the results, the study determined that the four profile types are “Progressive” representing 32% of those polled, “Standard” representing 28% of those polled, “Flexible” representing 23% of those polled and “Traditional” representing 17% of those polled.

So, what are the characteristics of the four profile types?

The “Standard” employer understands the basics of health insurance and retirement plans, but does not believe in fully funding them themselves. They most often offer their employees access to group rates on a voluntary basis. This means that the employees pay the most working for a “Standard” employer.

The “Traditional” employer believes strongly in offering health insurance and retirement plans to their employees and usually funds these core benefits. They may also offer other benefits on a voluntary basis that the employees must pay for themselves, but they do not feel strongly about making available all of the benefits that fit the specific needs of their employees. Even when they do offer any additional voluntary benefits, they do not educate their employees about the details of these “extra” benefits since they lie outside of the basic benefits they believe in.

The “Flexible” employer is more aware of all of the group insurance benefits available. They look at what other companies in their line of business offer their employees so that the packages they offer are competitive. They strive to find a balance between offering choices to their employees and the costs to themselves and the employees. They are much better at explaining the benefits to their employees and helping their employees choose what benefits they want and need.

The “Progressive” employer believes that the richness and diversity of their benefits program provides a competitive advantage over other companies in their line of business. They focus on meeting the needs of their employees, and provide more benefits beyond basic health. They believe in offering benefits and programs that address work/life balance for their employees.

The research shows that the four employer types are not industry specific and not influenced by the size of the company.

It may be time for some employers to reconsider their beliefs about group insurance benefits. Offering a more comprehensive and modern benefit program can benefit the company by enticing better workers in their industry. Also, choosing to cultivate health and well being by implementing programs and benefits that help employees stay well, will ultimately have a positive impact on a company’s bottom line.

Technorati Tags: employee benefits, employee health insurance, group health insurance, Group Insurance Benefits, small business health insurance, small group health insurance

Both the employer and employee want to know what group insurance benefits will cost them. For the sake of illustration, we will discuss group medical insurance as it is the most complex and the most costly of group insurance benefits offered.

To get a better understanding of the potential costs, you need to know what factors influence the cost.

There are five main components:

1.    The Type of Plan & Location of the Group
2.    The Size of the Group
3.    The Risk Adjustment Factor (RAF) – For Small Groups
4.    The Level of Employer Contribution
5.    The Level of Employee Contribution

In future posts we will go into more details about the types of plans offered. For now, you need to know that the more benefits the plan offers and the lower the deductible, the more it costs. Geographical location also influences premium amounts and are based on the applicant’s home address.

Businesses with 2-50 employees are covered under a Small Group Insurance Policy. In California the insurance carriers must offer the group coverage if they meet the minimum requirements. This is called “guaranteed issue” and is outlined in California law AB 1672. In addition to having 2-50 employees, 75% of eligible employees must enroll and employer must pay at least 50% of the employee’s premium.

On the other hand, businesses with more than 50 employees are not covered under this law and so do not have the same “guaranteed issue” as small groups. Coverage can be declined due to the group’s history of claims and the health history of the applicants. The premium rates for large groups are specific for that group’s claims experience and risk. Also, the plan options are different from those offered to small groups. They are offered many more options and as discussed above, the rates will vary from plan to plan.

The Risk Adjustment Factor (RAF) is defined by the Small Group Health Act §10700 as the percent adjustment to be applied equally to each standard employee risk rate for a particular small employer, based upon any expected deviations from standard claims. Effective July 1, 1996, this factor may not be more than 110 percent or less than 90 percent.

So, what exactly does that mean? To start with, standard rates have a RAF of 1.00. When you apply for small group insurance, the insurance company looks at the number of people that will be covered, the health of the participants, (specifically looking at any pre-existing medical conditions), the number of Cobra participants and the length of time the company has been in business.

If the group looks “healthy” and is seemingly a low risk, they may offer the group rates that are less than the standard rates. This rate decrease can be no more than 10% below (0.90 RAF) the standard rate.

If on the other hand, if the group looks like it is a higher risk and the insurance company thinks they will have more claims, they can offer them coverage at increased rates. However, the rate can not be more than 10% above (1.10 RAF) their standard rate.

Depending on the plan, an employer can elect to pay between 25% and 100% of the premiums. It is important to note that if the employer pays the full premium, premiums increase when they offer additional plans.

Obviously, any situation where the coverage is not paid 100% by the employer is going to cost the employee the difference between what the total premium is and what the employer contributes.

To provide current information about the nature of employer-sponsored health benefits, the Kaiser Family Foundation (Kaiser) and the Health Research and Educational Trust (HRET) conduct an annual national survey of private and public employers of three or more workers.

The 2007 survey show the following average annual premium contributions:

These results clearly illustrate the varying premiums for different plans.

And the totals for “All Plans” give you the average cost to the employer and to the employee.

Your costs will not match these figures, but they do give you some insight into the costs of group insurance benefits.

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Although all eligible individuals are able to get coverage under group insurance benefits regardless of age or physical condition, there are some minimal requirements that they must meet.

The two major criteria are that they must work a certain number of hours per week and have worked for a specified length of time before they can apply for coverage under the group plan.

What is the probationary period and what does it mean to a new employee? The probationary period is the length of time an employee must work for the employer before being able to submit their application for the group insurance benefits. The average length of the probationary period is 90 days, but can be more or less depending on the details of the plan.

How is the eligibility period different from the probationary period? The eligibility period is how many days after the end of the probationary period that the employee has to submit their application for coverage. This is usually 31 days.

What happens if you miss signing up for coverage during the eligibility period? Three things may happen depending on how stringent the insurance company issuing the coverage is.

The broker working with the insurer could backdate the employee’s application if it is not too long after the end of the eligibility period.

The employee may be subject to some individual underwriting.

The employee will have to wait for the plan’s next renewal, which triggers an open enrollment period.

If you are an employer, it is important that you make sure your new employees understand these eligibility guidelines.

If you are a new employee, make sure you know these time lines and do not miss the opportunity to sign up for your group insurance benefits.

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Group Insurance Benefits Companies

Group insurance benefits are sponsored (or in simpler terms, purchased) by employers, trade associations, labor unions, multiple employer groups, credit-debtor groups and lodges. When one of these entities enters into an agreement with an insurer, they are issued a master policy and the individuals participating are issued a certificate of insurance (COI) and an outline describing the benefits. To better illustrate this, with an individual policy, the agreement is between the individual and the insurer. With a group policy, the relationship is between the sponsoring organization and the insurer.

Types of group insurance benefits include medical, dental, vision, life, long & short-term disability and long term care coverage.

Depending on the agreement between the sponsoring organization and the insurer, these benefits can be extended to just the employee or may include coverage for their dependents.

Frequently, the benefits provided under group contracts are obtained at a far better rate than the employee could obtain on their own. Also, the benefits provided under these contracts are more extensive and have higher benefit maximums than do individual policies.

Since there is normally no medical information asked of the individual participants, some people might be able to get coverage under the group umbrella when they would be denied coverage because of pre-existing conditions or other factors if they applied for an individual policy.

However, group policies normally contain a provision excluding pre-existing conditions and state when a condition will no longer be regarded as pre-existing. Usually, the time line on a pre-existing condition is six months. This includes the three months prior to the effective date of the coverage and the three months after the effective date of the coverage. In order to be labeled as pre-existing, the participant must have had treatment for the condition during that first three-month period.

The area of group insurance benefits is a large one and there is much to discuss. In this blog we will discuss the details, guidelines, pros and cons, and future outlook of group insurance benefits.

To see what insurance questions are being discussed by insurance agents and brokers visit The Insurance Forums.

Technorati Tags: employee benefits, Group Insurance Benefits