A Business Owner’s Guide to Employee Benefits
As a business owner, you have a lot on your plate: marketing, budgets, forecasting, product development, and human resources are just a few of the issues you may have to tackle every day. Insurance benefits can be incredibly important to your employees. But you have to be mindful of the cost and the value to them. If you don’t provide enough, you can lose your top talent to a competitor. If you provide too much, a downturn in your business could be magnified.
I’ve spent 19 years in the insurance industry. I’ve learned that there are a few key considerations to designing a benefit plan. Author Simon Sinek suggests that you should always Start With Why before moving on to the How and the What. This is a great template for benefits as well.
One of the first considerations is: Why start a benefit plan? Nationally, 61% of small firms have health insurance benefits. Is your goal in providing benefits to attract and retain employees and foster better employee morale, or is it because you feel obligated to your employees? You may have a myriad of reasons for starting a benefits plan. It will be important to communicate these reasons to your broker.
The next question is: How should I design a plan (deductible, co-pays, etc.)? The average PPO deductible for small firms last year was just over $1,250. If you’re in a competitive hiring situation, it will be important to have a strong benefit plan. If your employees have lower wages, it might just be important for them to have access to their primary care provider for a reasonable co-pay.
Next, you have to start asking: What is this going to cost me and my employees? In Oregon and Washington, you’re not required to offer benefits to employees. And if you have less than 50 full-time equivalent employees, you will not have to offer benefits in 2014 either. But if you do offer health insurance, the law requires that you pay at least 50% of the employee rate. You are allowed to set the minimum hours anywhere between 17.5 and 40 hours a week. And you can require that employees work for up to 90 days before they’re eligible for benefits.
Premiums are based on a number of factors including average age, gender, industry, and participation. If you provide a listing of your employees (a census) to your broker, he or she can provide customized rates for your business. The average monthly premium for an employee last year was $468. If those were your rates, you would be responsible for at least $234 a month per participating employee. You can control your premiums by adjusting the benefit design. A good broker should be able to help you find a plan that fits within your budget and provides benefit to your employees.
Lastly, you’ll want to know: What should I expect in the process? As I’ve mentioned, a good broker should be your guide along the way. It’s best to choose a broker you trust and begin the process 90 days prior to your desired effective date. This will give you plenty of time to learn about the carriers, consider which provider networks they cover, review the rates, choose a plan, and then educate the employees about their options.
Most carriers will want you to turn in the application documents and the first premium check at least 2 weeks ahead of the effective date. If you have less than 6 employees enrolling, you may need to provide extra documentation to prove that you’re a bona fide business. Carriers may ask for your quarterly payroll tax filing, which shows the hours worked by each employee, or legal documents verifying the ownership of the business.
Regardless of how you answer these questions, a good broker should be your guide and your advocate along the way. Make sure you have a good relationship with your broker. You’ll want to rely on them to handle all aspects of your benefit plan so that you can continue to grow your business.
Since 1994, JR Hinds has helped small businesses design and maintain benefits plans to help them attract and retain quality employees through his business, Hinds & Associates. Health insurance is very complicated, but JR will simplify it and make sure that you and your employees understand your plan in order to maximize its value.