Array Bulletin: Service & Market Updates
for November 2009
With the new year approaching, we encourage you to think about health benefits
in a different way. Too often health benefits are seen in terms of co-pays,
deductibles, and annual maximums. On a broader level though, health benefits
are a form of compensation. This newsletter discusses how Array Health's defined
contribution service aligns benefits with compensation better than traditional
group medical plans.
Health Benefits as Compensation
Clearly, health benefits are a form of compensation. If a company pays 75% of
employee health insurance premiums, and some employees elect coverage while
others do not, the company is compensating some employees more than others.
Likewise, if a company contributes to the cost of a family premium, the company
provides greater compensation to employees with families than to those without
families. These inequities are based on the personal circumstances of an employee,
rather than on the employee's role or their tenure at the company.
Array and Defined Contribution Health Benefits
Health benefit plans should be designed to reward employee behavior, or reward
an employee for their role and tenure at a company. With Array Health, a company
can offer employees a defined contribution benefit in the form of a monthly
health benefits allowance. The company determines employee classes and decides
how much money to contribute to each class. This is a more equitable means
of extending benefits to employees, because even if employees don't use their
allowance for health insurance, employees can still use their benefit dollars
for other eligible
medical expenses.
Using Health Benefits to Reward Workers
Using Array Health's service, a company can offer different contribution amounts
to different employee classes. Employee classes are often chosen based on:
- Part-time / full-time
- Tenure
- Hours worked
- Occupation
Tenure is a popular employee classification. Many businesses decide that an employee
who has worked with the company for more than a decade should receive a larger
monthly benefits allowance than an employee who has been with the company for
less than a year.
Regardless of whether tenure is chosen as a means of employee classification,
with Array Health a company can design its health benefits plan to reward the
kind of employee behavior the company values most.
Employees Understand Money
Most employees do not appreciate how much money their company spends on their
health benefits. How can an employee evaluate the cost of an insurance program
with a $500 deductible and 80% coinsurance, when the same plan might cost $400
per employee per month (PEPM) for one company and $500 PEPM for another?
Employees understand money. We've found that employees often appreciate a monthly
health benefits allowance more than they do a health plan to which their company
contributes an equivalent amount. In essence, employees value a monthly benefits
allowance of $400 more than they value eligibility in a health insurance plan
with a $500 deductible and 80% coinsurance, even if the costs to the company
are the same.
Conclusion
A traditional group medical plan can misalign incentives and is difficult for
employees to value. Defined contribution health benefits plans offer an easily
understood and more equitable means of benefit compensation.
Please contact me if you have questions or need help with any groups.
Sincerely,
Christopher Moneta
Director of Sales
1-800-640-7086
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