Higher pay as an option instead of insurance

aliciac

I can't think of why this would be a good idea, but I want to properly articulate to an employee why our company doesn't want to do this.

We have suggestion boxes, and we answer every suggestion (even a Coke vs Pepsi vending machine suggestion). A suggestion came in to offer employees the option of declining medical benefits that the company offers (free of charge to the EE) in exchange for a higher wage. We do NOT want to do this. If someone has medical coverage by other means, they are welcome to fill out a form declining coverage and showing proof that they are covered in some other manner. We do not offer monetary compensation in lieu of benefits though.

Some reasons that immediately come to mind is that our younger employees who may not feel that medical and dental benefits are worth having will decline in hopes for a larger wage, and then regret is should some harm or illness befall them. I don't think that offering such a choice would be in the best interest of the employees.

Can you give me some more reasons so I can articulate this to the employee a little better? Obviously we can just say, "No, we won't do that." but it's more valuable to attach a good reason to it.

Thanks!

NeedCoffee

"Health insurance is not a part of your compensation package, it is a benefit provided by the company. You have the option of taking part in this benefit. Since health insurance is not included in your compensation, it would not be right of us to offer excess compensation for employees not taking part in the benefit - you have to compare apples to apples!"

"Insurance is an option, not a right, therefore you are not entitled to any additional benefit from not electing this option."

"Health insurance is a benefit just like the toilet paper we pay for in the bathroom. If you brought your own toilet paper to work, do you think it would make sense for us to pay you more? No? OK then - it's the same with health insurance." (OK, that one was just for laughs)

NaeNae55

Some companies do offer a bonus for employees who elect to take coverage under some other method. It is usually something like an annual bonus of $100 or perhaps a small bonus on every check. From what I have been reading, these plans are labor intensive. Usually someone has to take care of a new form (or make room on the current form) which shows the spouse has coverage elsewhere, etc etc. I have also been reading that many plans experience adverse selection after they have implemented this option for a year or two (apparently, the healthly employees tend to be the ones that leave the plan). In addition, your insurance carrier may have rules that affect your ability to do this.

- Additional labor and costs associated with additional form information
- Adverse selection
- Your insurance carrier's feelings on the matter.

All of these are good reasons NOT to follow the employee's suggestion.

Good luck!

Nae

aliciac

Thank you! ! All great reasons (even the toilet paper reason)

davids

Your insurance provider has most likely set your rates considering that all employees will be covered. If you allow employees to opt-out, you will end up with adverse selection. That is, employees who have medical conditins will opt-in, while healthy folks will opt-out. In the end, this will negatively impact your rates.

FunHRBanker

We only allow employees to opt out if they have other coverage. We pay them a "bonus" for not being in our plan, equivalent to 50% of what the ER pays for single coverage.

Ki

Our policy is similar. The employee must show us proof of their coverage, then we give them an insurance buyout equal to 25% of what we would have had to pay for them.

Our rationale for doing this is that if an employee and their family can be covered by the spouse's insurance as well, and both are good plans, then they will elect the spouse's coverage AND get a little boost in their pay from us. In the end, we save money.

stilldazed

Along with the adverse selection issue, your carrier has probably based your healthcare costs on a minimum census. Providing an incentive for folks who choose to opt out has the potential to drop your overall census to an unacceptable level for your group--could force you to make significant changes in your policy. It would be like letting a washing machine get out of balance and instead of rearranging the items to balance the washer, the incentive would in effect be encouraging the unbalance to continue and potentially get worse.

best wishes.