benefits design

The Best Practices In Benefits Design

SEAN ZAYONAgency Owner & Lead Benefits Consultant

P: 267-422-2881E: myphillyinsurancebroker@gmail.com

The Value Of Employee Benefits

Employees consider workplace benefits their personal safety net.

Employees consider health benefits nearly as important as their salary.

Employees are more likely to take a job with better employee benefits for a slightly lesser salary.1

1The 2014 Aflac WorkForces Report was conducted in January 2014 by Research Now

Benefits Package is a Tool for Employers

Employers should consider employee benefits important tools for: Retention Productivity Cost Control

The Rising Costs of Healthcare

Medical Plans are Important – and Expensive

75% of employees rank medical benefits are the most important benefit after salary.

Healthcare-related expenditures:

• Represent 17.8% of the U.S. economy(2013) and expected to reach 47% by 2024.

• Equal three times U.S. defense spending budget (2013)

• Is greater than the amount Americans spend on food, housing and transportation combined.

Choosing the right plan is a matter of:

• Balancing premiums and benefits

• Considering all costs of coverage

Types of Plans

• HMOs• POS• PPOs• Indemnity plans (aka “Major

Medical”)

Balancing Premiums and Benefits

But to choose the right plan………You must consider all costs!

Benefits Monthly Premiums

Members Cost At Point Of Service

Richer

More Modest

Higher

Higher

Lower

Lower

Three Main Cost Categories

Immediate employer costs (PREMIUMS)

Longer-term employer costs(COSTS AT FUTURE RENEWALS)

Employee costs (DEDUCTIBLES, OUT-OF-POCKET)

Copays, Deductibles and Coinsurance Maximums

Copay BucketYou never fill the copay bucket as they continue throughout the plan year.

Deductible BucketAfter annual deductible is paid, the deductible bucket is full

Coinsurance Max bucketsAfter the deductible is paid, the insurance company begins cost sharing with employees at the coinsurance level until the maximum is met. When the coinsurance max is met, the bucket is full.

Drafting the Benefits Plan Structure, Funding Options and Design

Contributions

The basis of cost-sharing with employeesCommon structures include:• Employer pays 100% for employee-only coverage, employee

must contribute for dependent coverage.• Employers and employees share the costs for both

employee-only and dependent coverage.Can be structured according to employee

classificationSubject to non-discrimination rules

Plan Offerings

Important guidelines:Keep offerings to two or three plans

maximum, preferably with a “base plan/buy up” approach

Do not offer plans more than two benefit levels apart

Controlling Costs Over Time

Relationship Between Premium and Claims

20% of the population drives 80% of the healthcare claims

Pools spread risk among many rather than just a fewPremium dollars are polled to help pay large claimsEvery group may not have a large claim every year,

but every year groups have large claimsHealthier population = lower healthcare costs =

lower premiums

Strategies to Help Control Costs

Consider higher cost-sharing with employeesMaximize network discounts with an extensive

provider networkEncourage generic substitution and use of home

deliveryConsider use of TeleMedicine services and

Supplemental Insurance (i.e. Aflac)Educate employees on wise plan useEncourage preventive careConsider use of Wellness Programs

Reduce Exposure with a Higher Deductible Plan

Higher deductibles

• Employees still have the benefit of copays from doctor visits and prescriptions

• Preventive care covered at 100%

• Lowers premium costs

Adding Supplemental Insurance (i.e. Aflac)

• Helps employees with out-of-pocket expenses like copays and deductibles pertaining to accidents or illnesses.

Adding TeleMedicine Services

• Phone a doctor – Saves time and money.

• Discount Dental, Vision, Prescriptions, vitamins

Make it a Package

Dental Plans

Often considered an important part of a benefits package

Very popular with employees

Can be offered as a voluntary benefit

Benefit plan options:

DHMO

PPO

Plan Limits

Disability Plans Disability coverage protects both ministry assets – your people –

and your employees financial security

One in three employees will be disabled before retirement

The vast majority of disability claims arise from common conditions like cardiovascular disease, arthritis, back pain, cancer, pregnancy or joint issues

Shot and Long-term disability plans have benefits that coordinate to provide maximum protection throughout a disability

Can be offered as a voluntary benefit.

Can help lower the cost of worker compensation by covering off the job injuries and keeping employees from filing false claims

Supplemental Insurance May be offered as a voluntary

benefit

Policies include:

• Accident

• Hospital Confinement Indemnity

• Cancer/Specified-Disease

• Critical Illness (Specified Health Event)

• Vision

• TeleMedicine

Other Benefits

Life Insurance

Annuities

Retirement Plans

401(k), 403(b)

College Planning

Stock Options

QUESTIONS