Got to cut insurance costs!

hrbanker

We've got to get a handle on our insurance costs. I'm considering a policy to only insure employees with no other access to coverage. -In essence, requiring them to go on a spouse's policy if there is one available. A broker had suggested this as an option about 10 years ago. Last year we picked up about 10 singles when a major employer in the area required spouses to use their employer's coverage as primary - but only if their employer didn't have a policy in effect requiring them to be on their spouse's coverage.

Has anyone done this? What are the pros & cons? If it can be done, it would trim about 5% from my health insurance expense just bouncing the 10 back to their previous coverage.

Thanks for your suggestions.

Brad Forrister

I think your post suggests some of the problems:

- How do you know whose spouse has coverage?
- What happens when two employers require employees to be on their spouse's coverage?
- While you're saving your company money, you may be costing your employees a good bit more money, especially if they have to pay full family coverage rates to get covered at their spouse's place of work.

What we've done here with some success is to give employees an "in-lieu-of-insurance" amount if they agree to go on their spouse's coverage. That saves us money, because we don't give them the entire amount we'd have to pay our insurer. And it helps them defray the cost of insurance.

Brad Forrister
Director of Publishing
M. Lee Smith Publishers

hrbanker

Thanks for your suggestion.

It would require some administration to only cover those without other insurance, requesting verification from spouse's employer. Also, we would have to have a tie-breaker, such as using the birthday rule if both companies had the same policy.

The in-lieu-of money is taxable to the employee isn't it? Do you worry about employees taking the money and not having coverage elsewhere, or do you require proof of coverage to make the payment?

Thanks again.

Brad Forrister

It is taxable, although presumably it would net out against part of the nontaxable cafeteria-planned spousal/family coverage amount at the other company.

We don't require proof of coverage, although that's not a bad idea.

Brad Forrister
Director of Publishing
M. Lee Smith Publishers