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Advice Needed on a Health Care Matter
Benefits & Compensation
Advice Needed on a Health Care Matter
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
Hi there:
I have a single employee, currently enrolled in our group health plan, who is getting married to someone who does not work with us in April. He wants to drop our health insurance group pl
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Forums » Topic Forums » Benefits & Compensation » Advice Needed on a Health Care Matter
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Advice Needed on a Health Care Matter
posted at 1/20/2010 11:06 AM EST
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Posts: 1
First: 1/20/2010 Last: 1/20/2010 |
I'm not in HR, but rather work on the brokerage/consulting side of the table. Having dealt with similar "opt out" concerns from various employers over the years, following are my thoughts...
1) It would be discriminatory to pay this employeeâs spouseâs premium without offering same opportunity to other employees; aside from the administrative issues such would pose with each spouseâs employer premium differing, the fact that youâll be reimbursing employees in differing amounts would likely take you right back to the discriminatory issue. 2) With any type of âopt outâ incentive, you need to weigh the cost of providing this benefit to those employees who are presently voluntarily opting out without any incentive. This can be accomplished through a fairly straight forward âbreakeven analysisâ to determine the additional number of employees that youâll need to incent off the plan and realize a savings for against the cost that you will be paying to these new opt outs and the previously existing opt outs. 3) Adverse risk selection â If your plan is self-funded, built into any âbreakevenâ analysis is the assumption that the company will realize a savings by this individual not incurring âaverageâ claim costs. However, my experience has been that employees who inquire about the possibility of any type of opt out incentive, are likely low cost healthcare users that might actually be âhelpingâ keep your plan costs down. Removing the good risks from your insurance pool could lead to a worsening of the overall pooled risk and increased renewal costs. 4) Coinciding with #3 above, it has been my experience that individuals who have lower healthcare incidence and inquire about opt out incentives, are likely half way leaning towards electing coverage under a their spouseâs plan regardless of whether or not you provide an opt out incentive (they are not considering a change if the spouseâs benefits are worse or more costly). 5) While mitigating the number of bodies you cover on your healthcare plan (so long as youâre of a decent size â see #6 below) is typically a good strategy, there are really two common approaches that employers use towards this objective â the âopt outâ incentive approach described previously (carrot) vs. a âspousal carve-outâ or âspousal surchargeâ approach (stick). 6) If youâre a small employer with fully-insured coverage and your renewals are dependent upon some % of experience rating, you again could be âhurtingâ your experience and driving up future premium costs by insuring a less desirable risk population. 7) The âspousal surchargeâ approach states that âifâ your employeeâs spouse is both employed and eligible for group coverage through the spouseâs employer, the employee would have to pay a surcharge in addition to the normal contribution amount for EE + Spouse coverage if the spouse were to be enrolled on your group plan. While some employers do not think this to be a âfamily friendlyâ approach, the thinking is that (both employer plans being fairly equal in terms of benefits and contribution cost) the small disincentive may be enough to dissuade the employee from covering their spouse (and possibly themselves and other dependents) on the employerâs plan, and might in fact persuade the employee onto the spouseâs employerâs group plan. Taxable income â Employees need to recognize that any opt out incentive would be considered taxable income. I hope the above is helpful! |
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