Employees consider supplemental insurance plans to be a vital piece of their overall physical and financial wellness. Employers who offer robust benefits packages with supplemental insurance options are able to attract and retain a more productive and engaged workforce.
The changing face of health insurance has created uncertainty and insecurity for many American workers, with nearly 50% reporting that they are not financially prepared to pay out-of-pocket medical expenses should they experience an unexpected illness or injury. Employers of all sizes are similarly feeling squeezed when trying to balance the rising costs of healthcare with their business’ growth and engagement objectives.
Small businesses (those employing 500 or fewer employees) employ a significant percentage of the US workforce; currently, small businesses employ 58.9 million Americans. To compete with large corporations, many small and medium-sized enterprises have turned to supplemental insurance options as a way to recruit and retain top talent and increase employee engagement and productivity.
What is Supplemental Insurance?
Supplemental insurance plans help to cover gaps in healthcare coverage or pay for expenses that traditional health insurance does not. Among the most popular plans are those that cover hospitalization, accidental injuries, critical illnesses, maternity care, and short-term disability.
While some employers may worry that additional benefits are out of reach due to the added cost, most are surprised to find that they can offer these plans with little to no added costs, and may even save money as a result.
Types of Supplemental Insurance Plans
Supplemental Insurance policies supplement the coverage of traditional healthcare benefits and provide employers with the flexibility to offer a broader range of coverage to their employees. These plans often have no or low minimum enrollment requirements and frequently do not require medical underwriting, and have flexible funding options:
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Employer-paid
When employers pay the premium costs for their associates’ supplemental insurance policies, they add value to their overall compensation packages without the added payroll tax liabilities that would result from direct compensation increases. Moreover, since 100% of the premiums paid are deductible for the business, businesses frequently break even or even save money after implementing supplemental coverage.
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Employee-paid
Employee-paid plans allow employees to make decisions based on their individual needs and purchase additional coverage for themselves and their families, often with pre-tax payroll deductions.
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Employer-paid with employee buy-up options
With mutually funded plans, employers pay the supplemental insurance premiums for their employees and give employees the opportunity to purchase the same coverage for their spouse and dependents through payroll deductions.
Why Should Employers Offer Supplemental Insurance?
Retain Your Workforce
49% of employees surveyed in the 2017 Aflac Workforces Report shared that they were at least somewhat likely to seek out new employment over the next 12 months. While turnover will always be a natural element within any organization, nobody wants to lose key employees for preventable reasons. Surveyed employees reported that an improved benefits package is one of two top actions that employers can take to increase their satisfaction and keep them in their roles.
Attract Top Talent
The Workforces Report also revealed that 42% of employees considered their benefits package to be extremely or very important when weighing the decision to leave their current employer. While this is bad news for companies who are not offering the robust and flexible plans that employees expect, it is a boon to those who understand the value of providing competitive benefits.
58% of employees surveyed shared that they would consider taking a role with lower compensation if it had better benefits. For employers, this means adopting a strategic approach to employee benefits can yield big rewards without a big investment.
Foster Financial Wellness
PwC’s 2018 Employee Financial Wellness Survey revealed that employee concerns over healthcare and its associated costs are substantial. More than one in five employees expressed willingness to forgo future pay increases in order to secure better healthcare benefits. Further, employee’s financial stress directly impacts their productivity and attendance at work and can lead to problems with their health and at home, which further exacerbate these effects.
44% of those earning an annual salary greater than $75K reported financial stress related to their inability to save for an emergency, while 54% of those receiving less than $75K reported the same, indicated that increased compensation alone does not resolve employee concerns. Supplemental insurance plans that help employees cover the costs of medical emergencies and accidents are one way that employers can help ease the burden of financial stress.
Achieve Organizational Goals
Supplemental insurance and other employee benefits do more than help employees achieve their goals; employers increasingly see them as a tool to help them achieve organizational goals. 75% of surveyed employers identify their benefits programs as having a positive impact on employee productivity, recruitment, and retention.
Reduce Payroll Taxes
Employer contributions to supplemental insurance plans, such as those provided by Aflac, are 100% tax deductible. Many employers cover the premiums for their employees and allow their employees the option to contribute to coverage for their spouse and children. Employers benefit from these deductions, as well -- employee contributions can be made through pre-tax payroll deductions for many plans, which will further reduce the employer’s payroll tax liability by up to an additional 7.65%.
For employees to use pre-tax earnings for their premium payments, employers will need a premium-only (POP) plan. While many brokers charge fees that can reach into the thousands for POP plans (also called cafeteria plans or 125 plans) some, such as Aflac, provide them with no cost to you at all.