Our company PointAbout, Inc has been researching health insurance options for over 6 months now. I've always understood health insurance to be a complicated mess, but the more I dig into it, the more I wish I didn't have to.
Several of the executive staff at PointAbout have evaluated various health insurance options, but we haven't been able to find a plan or provider that gives us what we want. So, I'm turning to my blog with my wish list for company-provided health insurance to see if anyone has any suggestions or ideas.
First, some setup: We have about 25 W2 employees, and another 12 parttime to fulltime independent contractors doing work on a project basis. Of that total, we have 12 people in California, and the rest are in the DC area (DC/MD/VA). Everyone has different needs/wants: Some have families, some have their own personal healthcare at good rates and want to keep it, some have personal healthcare but want to move to a corporate plan because it would be cheaper.
So here's what we're looking for, ideally. Does this exist? Or a variation of this?
Offer employees a monthly bucket of money (start at $100 per employee per month and increase it as we grow) and let them choose how to spend it... health insurance, life insurance, disability insurance, dental, vision, etc. Have the employee pay 30% of the health insurance plan so they have skin in the game-- that encourages them to choose the HDHP plan. Also, put a certain amount of Health Savings Account (HSA) money in annually (maybe $500?) for each employee who chooses HDHP.
Since the HDHP is cheaper for the company, encouraging the employee to choose it by having them pay 30% of the health insurance premium and putting some cash towards the employee's HSA (that rolls over annually) while paying $100/mo for anything the employee wants to spend it on feels like it's strike the best balance for all parties involved.
And it would be ideal if the employee could put that $100/month towards their own, or their spouse's healthcare costs -- i.e., they don't have to go with our plans if they didn't want to, but could put that money towards the healthcare they're already buying (pre-tax, if possible).
(Thanks, by the way, to Michael T. for suggesting this approach -- I won't post his full name unless he's OK with me doing so)
Anyone know if this can be done? Any suggestions about alternate approaches that have worked well for others?
We're still wrestling with this. One of our employees has this on her to-do list and is spending time every day evaluating options. Here's a note I just sent her about using an HSA -- does anyone have any experience just doing an HSA and not actually getting full-on health insurance until the company gets a bit bigger?
"Find out more about HSA's pre-tax. Can we as a company choose not to do healthcare yet, but instead pay $100 per employee pre-tax into an account that the employee can use. Find out what restrictions there are on HSA... is it any health plan that can be paid towards? Can it go towards glasses? Dental? What about long-term disability? 401k? Prescriptions? etc. Find out from our banks if that can be done through them, and then also talk to the brokers about doing it through them."
Jed, thanks for your thoughts. You have a great reputation as an expert in the space, so I appreciate you taking the time to contribute. Since we're a small company, $100/mo is the best we can do now, but our goal is to increase that over time. I understand your point about costs being high for the employee with only a $100 contribution.
Question for you: Is it possible to provide an employee with pre-tax money (i.e., the $100/mo) and have *them* decide how to spend it? I.e., maybe they spend it on their personal insurance plan. Is that possible, without us actually providing health insurance per se? I.e., my thought is, what if as a start we just provide pre-tax money to the employee for them to use on any health-related costs as they see fit. (They could use it for health, vision, dental, etc.)
I guess I'm wondering if such a thing exists as a "pay money pre-tax" plan for health-related items.
The other potential issue is Health Insurance carriers require certain % participation to establish a group plan. Typically this is 75% of eligible employees. Employees enrolled in a spouse's plan do not count negatively towards participation; however, employees choosing not to enroll because they are enrolled in an individual plan can present a problem in terms of meeting participation. In general, employers that do contribute a larger portion of the employee only cost do not have issues meeting participation.
I VERY much agree with your ideas on having employees making a contribution so they have skin in the game and I am also a big fan of HDHP with HSAs. Of the over the 300+ VC backed companies our firm consults a very high percentage offer HSA qualified plans, and I have been a proponent of them since their inception in 2004.
Thank you also for sharing what nirvana would be for you, and I agree health insurance can seem to be a complicated mess because it really is . There are elements of your ideal situation that can be accomplished, unfortunately health insurance specifically and benefits in general are quite costly. For employers with less than 50 employees the rates are based on an employee's age in increments of 10 years, i.e 20s, 30s, etc. Premiums go up as individuals get older. Premiums for an HSA eligible PPO plan for an employee in their 20s with a $3000 individual deductible are in excess of $200 per month (this is pretty much the least costly situation an employee can be enrolled). The costs increase pretty significantly for employees in higher age brackets and MUCH higher for employees enrolling with dependants. The biggest obstacle for the nirvana situation would be the $100 per month employer contribution as employees could be paying anywhere from 55% to 90% of the total medical cost and this does not include an employer HSA contribution, dental, vision, life insurance, disability...
Bobby thanks for the heads up. I'll definitely look for that article. if you come across it, please let me know.
Amazingly, this seems to be very hard to do. One would think there would already be a plan for an approach like this.
Elizabeth, great to see we're not the only ones thinking this way. It's just crazy that it's not easy to do what we want. I'll definitely give you a call to discuss in more detail.
Dan, I feel your pain my friend! We go through this every year. Yes, this option exists, and it's what we do, but it requires a lot of "strategic thinking" on the part of the company, since I've not yet met a broker who comes to us with the concept neatly tied up in a bow. My broker says every year how "creative" we are in offering options. Don't get me wrong - it's a lot more work for the broker too, but if you want, I'm happy to walk you through our thinking and how we got here. We have a $$ amount we allocate per employee per year, which if they are single, and don't need fancy programs, they can pocket the money in an HSA to grow tax free! If they have a family to cover, it can help offset those premiums. Drop me a line it you want, and good luck...Elizabeth
I have a very specific way I compensate employees, which I'd like to share. I've found that this method does a great job of aligning an employee's interests with the company's, which is a "nirvana" of sorts considering how misaligned an employees interests can often be with a company's.
I'm going to give you an example based on hourly pay, but this can just as easily be applied to annual salaries.
So let's say that I'm interviewing someone who wants to make $20/hour (roughly equivalent to $40,000/year).
First, I'll explain to them that one of my main goals is to align their interests with the interests of the company, and to do that I have a somewhat unconventional way of compensating employees.
Then, I ask them to tell me what percentage of their compensation they're willing to make "performance based." (Don't call it a "bonus" because it's not - this is different.) Let's say that a potential employee is willing to make $5/hr performance based, and wants the other $15/hr to be fixed (obviously the more an employee is willing to make performance based, the better it is for the company, and ultimately, the employee).
PF is Provident Fund is a part of your salary, which is deducted every month and deposited on your behalf. If you work in a private firm then the company pays the same amount as it is deducted from your account and when you leave the firm you can apply and withdraw the amount saved. It's actually your personal saving of your earnings. If you are in government service then you will get the lump sum when you retire
.As per new rules, it is calculated along with other allowance like conveyance and medical which are common to all the employees.
How to Calculate PF?
First you have to calculate the Basic Salary which is approximately 50% of the CTC. 12% of Employee Share towards PF 8.33% of Employee Share as Family Pension Funds 3.67% of Employer Share for EPF