Employee Benefit Plan Cost Sharing with Employees: What are Your Options?
Mark Bajus, CEBS • January 5, 2018
Its very common to have some form of Employee Benefit Plan cost share with employees in your business. Cost sharing ensures employees understand and appreciate the total cost of a plan, and spend the benefit dollars they have access to wisely.
Two Forms of Employee Benefit Cost Sharing
Cost share comes in two main forms: premium share, and co-insurance (only partial reimbursement) of submitted claims.
Premium share takes a number of forms. The more common employee benefit premium sharing options include the:
- Employee paying 50% of their monthly premium,
- Employee paying for Life, Long Term Disability, while the company pays the remainder
There are some tax advantages to how employee benefit premiums are shared. The business can pay the entirety of the extended health and dental premium, and no taxable benefit has to be charged to the employee. If the employee pays 100% of Long Term Disability premium, claim payments when disabled are tax free (otherwise they are fully taxed as regular income).
Co-insurance cost sharing
Coinsurance features of Employee Benefit plans means high users effectively pay more. The more of each claim that an employee has to pay, the lower the premium will be for that benefit. Coinsurance levels vary from 100% (meaning claims are 100% paid and the employee pays nothing), to as low as 50% (common as the level for major dental coverage or orthodontics).
A well thought out mix of premium cost share and coinsurance cost share levels ensure that an Employee Benefit plan is affordable for the owner, and that employees participate and appreciate plan costs and design.
BF Partners is a Financial Service company offering Employee Benefits and Financial Planning/Pension advice for businesses and business owners. The BFP brand stands for quality, integrity, commitment and professionalism. Click here for more information on BF Partners Employee Benefits plans.
Mark Bajus - CEBS, CLU, CFP - is the Director, Group Benefits for BF Partners. Learn more about Mark.
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