Q: Do insurance benefits help families retain their employees? How does a family go about setting up the insurance portion of the benefits package for their domestic employees?
A: The quick answer is YES. Insurance is a common reason employees stay with their employer, whether it is in a domestic or commercial setting.
The first step when setting up your insurance plan is to consider exactly what types of insurance to include in the benefits package and from whom to buy them. Most people immediately think about medical and dental plans and begin comparing rates.
We suggest clients think about a “totem pole” of coverages that start with covering the most likely and catastrophic needs and work their way down so they get the greatest potential return from each insurance dollar.
Then, they should find an agent who is licensed in their state to sell the individual or small group policies they are looking for.
The Insurance Totem Pole
- Disability Insurance
- Health Insurance
- Life Insurance
- Home Owner’s Insurance
- Automobile Insurance
- Supplemental Policies (for specific needs, such as Cancer)
Here are a few comments about the coverages I believe to be most important…
At the top of the totem pole is disability coverage. There is a greater likelihood of someone becoming impoverished due to a loss of their income caused by a disability (short term or long term) than due to a loss of their home, yet everyone has homeowner’s insurance. Loss of income, particularly if it is for the rest of their lives, will impoverish an employee. The plans are not very expensive, and they provide tremendous benefit in a bad or worst-case scenario.
Moving down the totem pole, the next major area is health insurance. The main focus for clients is providing comprehensive major medical coverage to cover a catastrophic situation. Don't be concerned about a $100 or even $1000 bill, since employees or their employers can often handle that level of expense. Be concerned about a live-changing health problem that costs tens of thousands or more, with live-long potential costs for treatment and medication.
A worthwhile Comprehensive Major Medical policy must cover:
- Emergency Room visits
- Doctor’s Office visits
- Clinic visits
- Prescription medication (not a discount card, saving you 20%...that won’t help you in a catastrophic event resulting in $1000’s per month in medication)
Premiums. With respect to premiums, they actually mean very little in and of themselves. The reality is that premiums can be managed to a large extent through the deductible. Even if you have to go with a high deductible, if your employee has a catastrophic accident, you can limit your exposure to $5000 to $10,000.
Example: The premium for a 30 year healthy male with a $5000 deductible is just $86.53/month for comprehensive major medical coverage.
The factors that do drive health insurance premiums include sex, age, and preexisting conditions. It is well worth noting that individuals must qualify for coverage through an underwriting process that considers their health. If you have certain preexisting conditions, you may be uninsurable through individual health plans.
Common factors that can make employees uninsurable:
- Internal cancer within 10 years
- Heart-related conditions or procedures (cholesterol and blood pressure are insurable)
- History of drug and alcohol problems
(Note: As the employer, you should not and may not inquire about the health condition or preexisting conditions of your employees. Only a licensed insurance broker may ask these questions, and they are not allowed to tell you what they find. If they discover a condition that makes your employee uninsurable, they may only share that fact. Asking about such conditions may open yourself to poor employment practice liability…whether you are aware of the risk or not.)
Group Plans. Group coverage is available to groups as small as 2 people. The benefit of the group plan is the guarantee that the insurance will be issued regardless of preexisting conditions. The only caveat in this case is that the premium will still vary based on the individual participant’s health factors.
Lesser Plans. By comparison’s sake, we suggest clients be leery of lesser coverages. We would typically describe the tiers, working your way down, like this:
- Comprehensive Major Medical – covers the catastrophic situation…best use of insurance dollars
- Major Medical
- Major Hospital
- Basic Hospital (something you might see through AARP that would pay $20-100/day while you are hospitalized; very limited benefit)
- Minor Medical’ (seen more commonly in the ‘blue collar’ market, employer doesn’t want to or can’t afford to buy in one of the top 3 tiers, so this limited product is offered to employees to give them ‘something’ if they were to be hospitalized, have a surgery, etc.; very low deductibles, very limited benefits.)
- Dental (benefits related to the cost of the policy are relatively low; accident-related events would be covered under the health insurance)
Dental Coverage. Some people are surprised that we suggest they just pass on dental coverage altogether and instead offer to pay for their employee’s basic preventative care out of pocket. The fact is, the benefits relative to the cost of these policies are low, so you really aren’t getting much for your premiums, and accident-related events that might involve expensive reconstructive work would typically be covered under the health insurance.