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March 10, 2009

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As benefit plans continue to play a key role in employee attraction and retention, careful thought to the establishment of benefit plans is critical. In some cases, benefits can total an additional 34 to 35 percent of salary. Not only does one want to maintain core benefit plans (Medical, dental, 401k, life, and LTD plans at the minimum), these plans must be designed, communicated, and administered in a way to be cost effective and useful for the employee population. Detailed below are some considerations for establishing a medical plan.

Plan Design

In designing core benefits, it is important to understand the demographics and insurance needs of the employee population. For example, many high-tech firms employ a multi-national workforce that may have differing ideas about medical care. This is an especially important point when considering implementing a gatekeeper vs. non-gatekeeper plans, alternative care coverage, plan premium levels, as well as enrollment waiting period for new hires.

Cost

Benefit plans can be costly. Not only are there the premium costs, but the administration costs as well. Also, if you are working with a plan with 50 or less covered employees, you may be paying premiums based on a "Community- Rated Plan." These amounts may be higher than those paid if your premiums were based on your employee population. It is always a good idea to review your benefit plans annually, as there may be cost-savings for you to realize. To review benefits, you will need to keep an employee census current. Generally, the information needed for a census includes employee SS#, date of birth, home zip code, spouse, and dependent SS#'s, if applicable.

Another important feature to note is that plans that are non-contributory in nature (i.e. the employer pays the full premium amount) you are required to cover all employees and their families, regardless of coverage elsewhere. To avoid duplicate coverage, some employers offer the medical benefit at a nominal cost to employees, which allows for them to "opt out' should they show sufficient proof of coverage with another plan.

Also, one should note that there are a number of coverage options in terms of premiums. If your plan currently has a two-tiered premium status (employee and family), you might consider an alternative (such as Employee, Employee + child(ren), Family) depending on your workforce needs. Another method for covering a varied workforce would be a "tiered plan," in which there are two or more levels of coverage that vary in cost to the employee (such as a gatekeeper plan and a non-gatekeeper plan).

Administration

If you are utilizing the services of an insurance broker in selecting your plans, I recommend that you find out how effective they are at helping you resolve any claims issues. As brokers derive an income based on the monthly premiums, it is important to know that they will assist you after the sale is made. Otherwise, you may find yourself spending a great deal of time speaking with the insurance company to resolve any claim issues. This is an especially difficult task for smaller firms whose plans are not "key" with the insurance carrier and who cannot afford an in-house benefits administrator.

Communication

Communication regarding benefits is essential in keeping administration costs at a minimum. The more information employees have about their benefits, the more apt they are to avoid problems regarding plan provisions and resolve issues on their own when they arise.

Conclusion

Benefit plans are a key element in attracting and retaining talent, but these benefits must be aligned to the needs of the targeted population. Listening to employee feedback regarding current benefits, as well as a more formal benefits survey, serve as tools for keeping benefits aligned with your workforce.

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Filed Under: Workplace Issues

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