Health Insurance Cost

When many leading employers offer generous benefits packages to attract and retain talent for competitive environments, other employers can actually increase their turnover. We have clients that appropriately pay 100% of all the benefits for the employee and dependents. A few of these companies do this to overcome the challenge of a limited population for certain industries especially in bioscience and technology. However, here is a real-life case study of a client that should strategically reallocate the benefits dollars towards a more employee-centered priority.

A cleaning company with 45 employees that pays between $14-18/hour struggles with their turnover. The owner is compassionate and genuinely cares for his employees’ well-being. They offer a rich Gold level plan with a $250 deductible and pay 100% of the benefits for the employee and 90% of their dependents. However, the employees leave to work for a competitor for as little as $1/ hour more. Why?

1. The raise. Premiums increase every year because rates increase and the age of each employee increases. Even if the insurance issues a rate pass, the premium will increase at least 1% due to the employee’s getting older. Imagine rate increase of 15%, the employer is absorbing the entire cost. The employee does not realize they are getting a 15% increase. At $15/hour, a cash raise would have increased they pay rate to $17.25.

2. Medi-cal/ Medicaid. Typically, an employer will offer dependent coverage at the employee’s expense. Employees are likely to take the dependent coverage because the premium is tax deductible. If an employee’s household income qualifies them for Medi-Cal/Medicaid, they are likely to enroll in the program for their dependents and only accept medical coverage for themselves. In some cases, they waive coverage and enroll the entire family in Medi-Cal/Medicaid. When the employer pays 100% of the dependent coverage, the employee has no incentive to enroll in Medi-Cal/Medicaid.

3. Employee’s Priorities. Employees making low wages make unimaginable sacrifices the employer may not know about or remember if they had a humble beginning. These sacrifices have to do with the most basic needs such as feeding ones family, diapers and formula and paying rent. Additionally, transportation adds another layer of challenges. Low cost, reliable public transportation may add the challenge of commuting for hours each day which then tax childcare.

Of the 45 employees, only two had medical-centered family needs. The rest of the employee population needed the dollars from the expensive premium to be reallocated to their paychecks to cover other basic, immediate needs including food.

The employer may consider increasing the employee’s dependent cost while still paying 100% of the employee’s benefits.

Contact our agency today for a complimentary, no obligation market comparison.

Coast General Insurance Brokers

T: 805-644-4740

CA Ins. Lic # 0F60642