the small business guide to health insurance allowances · zane benefits is the leader in...
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The Small Business Guide to
HEALTH INSURANCE ALLOWANCES
Free Yourself From The Cost and Complication of Group Health Insurance
HEALTH INSURANCE ALLOWANCES
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What is Zane Benefits?
Zane Benefits is the leader in individual health insurance reimbursement for small businesses. Since
2006, Zane Benefits has been on a mission to bring the benefits of individual health insurance to
business owners and their employees.
Zane Benefits' software helps businesses reimburse employees for individual health insurance plans
for annual savings of 20 to 60 percent compared with traditional employer-provided health
insurance. Today, over 20,000 customers use Zane Benefits' software, services, and support to
reimburse individual health insurance plans purchased independent of employment.
Zane Benefits' software has been featured on the front-page of The Wall Street Journal, USA Today,
and The New York Times. Zane Benefits was founded in 2006 and is based in Salt Lake City, Utah.
Zane Benefits' Partner Program is an opportunity for insurance professionals to provide clients with
custom Zane Benefits solutions. >> Request a Partner Evaluation.
DISCLAIMER
The information provided herein by Zane Benefits is general in nature and should not be relied on for commercial decisions without conducting independent review and analysis and discussing alternatives with legal, accounting, and insurance advisors. Furthermore, health insurance regulations differ in each state; information provided does not apply to any specific U.S. state except where noted. See a licensed agent for detailed information on your state. www.zanebenefits.com.
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HEALTH INSURANCE ALLOWANCES Free Yourself From Group Health Insurance
Introduction
For businesses to thrive in today’s economy,
finding and retaining the best employees is key
to success. This is especially true for small
businesses competing with larger businesses,
and larger budgets, for top talent. Additionally,
the landscape of employee health insurance is
rapidly changing. Businesses need new ways to
offer the same (or better) health benefits at a
controllable cost.
Happy Employees Help Your Business Thrive
Frequent voluntary turnover has a negative
impact on employee morale, productivity, and
company performance. Recruiting and training
a new employee requires staff time and money.
Every time a business replaces a salaried
employee, it costs 6 to 9 months’ salary on
average. For a manager making $40,000 a year,
that's $20,000 to $30,000 in recruiting and
training expenses.
On the flip-side, retaining employees who are
committed, loyal, and embody the business’s
mission are what gives your business its
competitive edge.
A strategic employee recruiting and retention
strategy mitigates the turnover and associated
costs for a small business. Employee health
benefits are a key part of the compensation
offered to employees, and therefore vital to
employee recruitment and retention efforts.
The New Way of Offering Health Benefits
Businesses are transitioning to health
insurance allowances (aka “pure defined
contribution health benefits”) because this
strategy offers predictable costs to the
business, while giving employees access to
quality health insurance.
Health insurance allowances reduce the cost and
time associated with traditional health insurance,
while maintaining all of the benefits employees
love.
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About this Guide
This eBook outlines how offering health insurance
allowances frees your business from the cost and
complication of group health insurance. With health
insurance allowances your business provides health
benefits that employees love, while staying within your
health benefits budget.
Small and medium-sized businesses are quickly
adopting health insurance allowances because of:
1) Controllable costs // pg. 5
2) Happier employees // pg. 8
3) Painless administration // pg. 12
This eBook provides an overview of these three
benefits.
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Controllable Costs
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Controllable Costs
Being able to set, control, and predict all health benefits costs is
revolutionary for many businesses.
Offering health insurance allowances gives your business
controllable costs because you:
Define your budget by setting any contribution
amount to employees’ health insurance.
Give employees monthly health insurance
allowances (via a Section 105 Medical
Reimbursement Plan).
Employees purchase individual health insurance
policies and submit a request for reimbursement.
The business reimburses employees on payroll.
The business only reimburses employees for eligible
premiums up to the amount of their health
insurance allowance.
Without annual renewal increases or minimum
contribution amounts, the business is free to control all
benefit costs.
Compared to Group Health Insurance
…
Average Employer Cost For One Year of Group Health
Insurance (2013)*
Single Employee:
$5,884 Up 168% since 1999
Family: $16,351
Up 182% since 1999
*Source: Kaiser Family Foundation, 2013
In the past, group health insurance was the best way to provide quality health benefits to employees. Today, group health insurance is a source of frustration to declining benefits and increased costs.
Businesses need the same quality of benefits, but with controllable cost and sustainable administrative effort.
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How Health Insurance Allowances Work
It’s a simple and effective approach,
But a significant change in how businesses offer health benefits…
Set any amount to contribute to
employees' health benefits
Give employees monthly health
insurance allowances
Reimburse employees on
payroll for approved premiums
Business liability is controllable & employees shop for policies that BEST meet their
needs
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Happier Employees
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Happier Employees
In order for a health benefits program to work, it has to meet the business’s budget and provide value
to employees. The following aspects of health insurance allowances contribute to happier employees.
Access to the Best
Health Care
Coverage for All
Employees
Access to Health
Insurance Subsidies
Predictable Costs for
Employees
Easy to Understand
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Access to the Best Health Care
Because employees choose which individual health
insurance policy to purchase with their allowance, they
can pick the health coverage that best meets their needs.
All employees are different, and employees say they no
longer want a one-size fits all health insurance plan.
Rather, they want options to customize their health
benefits.
With their health insurance allowances, employees
select:
Any type of plan, from any insurance carrier.
The network of providers and doctors they want to see.
The coverage level they want (the deductibles, co-pays, co-insurance, etc.)
Tip: Because some employees may not be comfortable selecting an individual health insurance policy
on their own, you may want to designate an insurance professional to help employees select individual
policies. This also shows employees you care about them and want to improve their health benefits.
(See: The Ultimate Guide to Individual Health Insurance.)
Coverage for All Employees
All employees (regardless of health conditions) are now able to
purchase an individual health insurance plan that is equal or better for
them than existing group health insurance options.
“61% of employees report
that being able to customize
benefits would increase their
loyalty.”
~ MetLife 2013 Study of Employee Benefit Trends
benefittrends.metlife.com
As of 2014, All
Individual Health
Insurance Plans
are Guaranteed
Issue
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Access to Health Insurance Tax Subsidies
Employees can use their health insurance allowance to purchase
policies from the new health insurance marketplaces. This gives
employees access to federal health insurance tax subsidies to
lower the cost of their premium. Eligibility for the tax subsidies is
based on income and household size. Households with income up
to 400% above the federal poverty line (FPL) will be eligible (up to
$45,960 for an individual in 2013, or $94,200 for a family of four
in 2013). Read more on the individual health insurance subsidies here.
Predictable Costs for Employees
Employees have a clear budget to spend on health insurance. Individual plans are, on average, 20%
cheaper than the same group coverage and rates cannot change each year because of a medical
condition.
Easy to Understand & Use
Lastly, employees value health benefits that are easy to
understand, and easy to use. Similar to the transition
from pensions to 401(k) retirement plans, the health
insurance allowance approach requires employees to
take more control of their health benefits.
Defined contribution administration software provides
employees easy 24/7 access through an online portal
where they can see benefit information and submit
requests for premium reimbursement (“claims”).
Employees will
only be eligible for
the tax subsidies if
your business
chooses not to offer
group health
insurance.
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Painless Administration
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Painless Administration
All small business owners and HR managers want to spend more time
on strategic issues, and less time renewing health insurance plans.
With health insurance allowances,
administration becomes a payroll function and
takes 5-10 minutes a month.
Once the plan is set up, the business’s administrative activities
include:
Adding approved reimbursements to payroll.
Enrolling new employees online.
Terminating employees from the plan when they leave the company.
Providing education to employees about the benefit.
Connecting employees with an insurance agent for insurance questions.
Tip: Defined contribution administration software is key to managing
these administrative aspects in a painless, compliant, and efficient way.
* Source: Talent Management Magazine,
“Make HR Happy.” http://talentmgt.com/articles/view/make_hr_happy. July 12, 2013.
Most HR managers
spend
< 10% of their time at the
strategic level.
Rather,
50-65% is spent processing
HR transactions.
Heavy
transactional
workloads make
recruiting and
retaining top
managerial talent
increasingly
difficult.*
•
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Next Steps
For a business transitioning to health insurance allowances, or for a business using health
insurance allowances to offer health benefits for the first time, here are the next steps:
Set a date to cancel your group health insurance plan (if you have one).
Define any amount you can afford for health benefits.
Use a Defined Contribution Software provider to:
o give each employee a fixed dollar amount to use on premiums,
o develop a customized transition and on-boarding plan, and
o educate employees on their new health benefits.
Select any insurance professional to give employees a resource in selecting the best
plan.
Conclusion
The new way to offer health benefits to employees is a health
insurance allowance paired with individual health insurance.
Employees pick the plan that best fits their needs, including the
doctor, keep the plan for as long as they want, and save money
with new premium subsidies.
By offering health insurance allowances, your business is able
to offer great benefits at a controllable cost, with less
administrative time.
The Result? Employees love their health benefits again!
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ADDITIONAL HEALTH BENEFITS RESOURCES
View our full library of health benefits tools, on-demand webinars, and eBooks at: www.zanebenefits.com/resources
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What is Zane Benefits?
Zane Benefits is the leader in individual health insurance reimbursement for small businesses. Since
2006, Zane Benefits has been on a mission to bring the benefits of individual health insurance to
business owners and their employees.
Zane Benefits' software helps businesses reimburse employees for individual health insurance plans
for annual savings of 20 to 60 percent compared with traditional employer-provided health
insurance. Today, over 20,000 customers use Zane Benefits' software, services, and support to
reimburse individual health insurance plans purchased independent of employment.
Zane Benefits' software has been featured on the front-page of The Wall Street Journal, USA Today,
and The New York Times. Zane Benefits was founded in 2006 and is based in Salt Lake City, Utah.
Zane Benefits' Partner Program is an opportunity for insurance professionals to provide clients with
custom Zane Benefits solutions. >> Request a Partner Evaluation.
DISCLAIMER
The information provided herein by Zane Benefits is general in nature and should not be relied on for commercial decisions without conducting independent review and analysis and discussing alternatives with legal, accounting, and insurance advisors. Furthermore, heal th insurance regulations differ in each state; information provided does not apply to any specific U.S. state except where noted. See a licensed agent for detailed information on your state. www.zanebenefits.com. [Rev. April 6, 2015]