Since we, fairly regularly, get questions from clients on the subject of employee benefits, I’d say it’s high time we called in someone with expertise to offer baseline information on the subject. Enter David Ten Eyck. David is an insurance veteran with over 25 years of experience in the review and placement of group health, life, dental and ancillary benefits. He is the principal of Ocean Employee Benefits (formerly Ten Eyck Benefits Group) in Newburyport. Ocean Employee Benefits strives to ensure that programs are compatible and consistent with the particular human resources and financial philosophies of the firms with which it works. To learn more, visit the company website. Below, David offers a broad overview of employee benefits options.
Opening a law practice requires that much thought and effort be expended in a number of important areas. Early on, the principal should look at commercial insurances and job-related compensation and benefits. The addition of employee benefits to the total package of employee compensation began years ago, as a means for employers to attract and retain quality employees to their businesses. Today, benefits have become extremely important to potential employees (and their families), when they consider employment with a particular law firm. Benefits should also be important to principals of companies who wish to build a loyal, effective workforce. Researching, analyzing and marketing employee benefits can be a complex endeavor, given that there are a wide range of things that can potentially be covered, including some instances where coverage is mandated.
Medical, dental and life insurance are considered to be the most important benefits, according to the majority of employers and employees; and, these top three are followed by short and long-term disability, pensions, accident insurance, and then a range of voluntary programs.
Starting with a group census(name, DOB, family status, wages, waivers) of your full-time employees (30 or more hours/week), you, your independent broker or other intermediary, can work with you to target what types and levels of benefits you wish to offer. Quotes can then be obtained from insurance carriers based on your budgetary goals. Additional options may also be available to small employers, including a broader choice of carriers and health plan alternatives, including those accessible via industry or association groups.
Group medical insurance is probably the most important building block of an employee benefits plan, and is made up of a mix of benefits for, among other things: (i) doctor visits; (ii) hospital stays; (iii) prescription access; (iv) medical screenings; (v) surgical consults and surgeries; and, (vi) many other inpatient and outpatient medical services, depending upon the plan of coverage purchased. In Massachusetts, residents (with minor exceptions) must be enrolled in a medical benefit program meeting minimum creditable levels of coverage. Failure to have health insurance coverage would result in personal tax penalties from the state.
Insurance company claims payments can be made by indemnity or based on what is usual and customary for that service. Enrolled subscribers are often responsible for copayments and/or deductibles for a range of services. The major health insurance carriers for Massachusetts include both non-profit (Blue Cross-Blue Shield, Tufts, Harvard Pilgrim) and commercial carriers (Aetna, United Health Care). Carriers offer networks of doctor and hospital providers, which can be closed (HMO) or open (PPO). In-network providers agree to offer services to subscribers at agreed-upon financial terms. It is important to know which doctors and hospitals are included in a carrier’s network before enrolling, because providers outside of a subscriber’s network often receive a reduced benefit payment from the carrier–meaning the subscriber would be responsible for a larger percentage of the payment for service. Combination, or side-by-side, networks can be utilized where services are required in and out of HMOs.
Other things to consider when selecting a provider include: (i) copay amounts; (ii) deductibles; and, (iii) coinsurance. It is important to note that there are a number of tax-advantaged arrangements available, where premiums can be paid with pre-tax dollars, including, for example, Section 125 plans. Both the Insurance Partnership of Massachusetts and the Commonwealth Connector provide referrals to programs that can be cost-effective for small firm employers.
Dental insurance is an increasingly popular employee benefit. Dental health is now seen as being closely related to the general physical health and well-being of the individual. Dental benefits are typically broken down into the following elements: (i) preventative work, including routine cleanings and visits; (ii) minor restorative work, including fillings; (iii) major restorative work; and, (iv) orthodontia, including optional treatment. Recent, typical dental plan enhancements offered include: (i) unused benefit roll-over from prior years; (ii) higher annual maximums; and, (iii) teeth bleaching. Dental insurance programs are offered as: (i) employer-paid; (ii) voluntary employee-paid; or, (iii) they can be purchased on an individual basis. Major dental insurance carriers include: Blue Cross-Blue Shield, Delta Dental and Altus.
Group Term Life and Accidental Death Insurance
Group term life insurance does not offer cash value built up over time, but is, rather, ‘pure insurance’, that pays out to beneficiaries upon the death of a covered employee. Supplemental life and accident insurance can also be offered to spouses and children of employees as part of a voluntary program. The face value of a policy represents the amount payable on death; and, within group plans that amount is usually set as a percentage of income, or as a set amount per class of employee. Many features can be added to term life programs, including: (i) accidental death and dismemberment, (ii) accelerated payments; and, (iii) executive benefits. Cash value life insurance, a product type growing in popularity, offers employees enrolled the chance to build up some value in addition to receiving the benefits of pure insurance. Accidental death and dismemberment policies, often marketed as an addition to a group term life program, can provide important, additional coverage to an employee, and usually pay out at an amount equal to the death benefit, should the enrolled die as a result of an accident. Special trip, corporate and other additional accident programs are also available.
Short and Long Term Disability Insurance
This is an important part of an employee’s benefit program, and can provide a family with some measure of financial security in the event of disability. Often, a disability plan fills in a continuance of income, enabling the employee, or his or her family, to continue to pay critical bills, such as rent, mortgage and/or health insurance.
These group benefit plans are typically either short term or long term, though intermediate terms are also available. For short term disability coverage, there is an elimination, or waiting, period, after the occurrence of a disabling event, before the benefit will accrue. There are also, of course, benefit duration limits. Most coverage is limited to 13 to 26 weeks of payouts. Long term disability coverage is designed to take up where short term disability coverage leaves off. These plans feature elimination periods, too, as well as durational restrictions–but, most plans will pay out until the beneficiary turns 65. Underwriters are often cautious when it comes to issuing disability insurance, especially long term disability, due to concerns over malingering, extended claim periods, return to work requirements and rehabilitation periods, among other things.
There are a number of coverages, beyond the chief options addressed above, that employers can offer their employees, including: long term care insurance; vision care; daycare; adult care; employee assistance programs; pre-paid legal insurance; and, pet insurance.
It is a difficult thing for small business owners to balance the financial costs of providing benefits to employees against the positive effect that the offering of an appropriate benefits package will have for attracting and retaining good employees. But, if that balance can be effectively achieved, and maintained, it will inure to the significant benefit of the firm, over time.