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For business owners, choosing the best health insurance policies for employees can feel like walking through a maze. There are many choices, and the primary goal is to select a comprehensive plan that covers essential benefits.
However, employers also have the option to offer secondary benefits to employees, which are better known as ancillary benefits. There are many advantages to including ancillary plans to standard employer-sponsored health insurance, and we’ll discuss them all. Also, over the years, ancillary insurers have created various ancillary products, so it’s essential to familiarize yourself with all options.
Health insurance is one of the most efficient negotiating tools during recruitment, and including ancillary employee benefits is a winning strategy. If you’re new to the idea of providing top-of-the-line health insurance to employees, here’s everything you need to know about ancillary benefits.
Ancillary health insurance is a supplement to an existing group of health insurance offered by an employer. Essentially, ancillary insurance is anything that isn’t covered by the existing healthcare policy, which includes a wide range of miscellaneous expenses.
For example, various expenses can occur during a hospital stay that traditional employer-based coverage doesn’t include.
Ambulance rides, blood tests, medical supplies, and even items like bandages often fall under the scope of ancillary services. Insurance provided by the employer often neglects factors that impact the total cost of healthcare, and ancillary plans are there to make up the difference.
Depending on how much the employer contributes to an ancillary insurance premium, the secondary benefits for employees fall into three basic categories.
In voluntary ancillary plans, the employer contributes from 0% to 50% of the coverage. In contributory plans, the employer pays between 50% and 75of the ancillary insurance premium, and in non-contributory plans, the employer pays for all 100% of the ancillary benefit.
Naturally, the portion contributed by the employer is charged through payroll deductions. It’s unlikely the employer would offer any other form of payment.
The ancillary insurance costs depend primarily on the size of the group participating in a single program. The larger the group, the lower the premiums will be.
Still, it’s important to know the price ranges and whether they are something an employer or employee can afford. For example, a monthly premium for dental, vision, and hearing plans can cost between $15 and $50.
Furthermore, suppose you want to get life insurance via an employer. In that case, the premium could drastically vary, depending on age, pre-existing conditions, and lifestyle habits, and can cost anywhere between $20 and $60 per month.
The complete list of ancillary benefits is quite exhaustive, and ancillary insurers always offer upgraded products. Here we’ll introduce as many ancillary insurance products as possible, so employers and employees know about what’s available on the market.
Besides knowing what are ancillary benefits, it’s vital to understand what each of them covers and if it’s something that fits into your planning.
Without a doubt, life insurance is one of the most popular ancillary benefits an employer can offer. There are many types of life insurance policies, but they all have the same purpose – to provide for an employee’s family in the event of their death. Often, life insurance policies cover funeral expenses, which are often quite expensive.
Furthermore, in the unfortunate instance that an employee has been diagnosed with a terminal illness, a life insurance policy fund can be used to help them pay for medical expenses while they are alive.
When discussing types of ancillary benefits, many people think of vision, dental, and hearing first. It’s something employees will ask potential employers when interviewing for a position.
Even though your eyes, teeth, and ears require medical care, they’re not included in the standard health insurance package.
So, they are offered as ancillary services. The insurance plan you receive via your employer might not include all three, and often, it’s only the dental that is provided as a secondary benefit.
Most employer-sponsored health insurance recipients are covered with a Preferred Provider Organization or PPO plan.
These plans allow you to choose a doctor and a healthcare facility and see a specialist without a referral from your primary care physician. A PPO plan can be supplemented by a Health Savings Account or HSA, which allows all employees to save pre-tax funds in a designated bank account for future medical expenses.
This ancillary benefit gives the employees more freedom to choose when to spend or save money for healthcare expenses. It’s also essential to remember that the employees own a HAS. That means an employee can transfer it from one job to another.
Unlike the HSA, the Flexible Spending Account or FSA is owned by the employer, though the money contributed to the dedicated bank account is also tax-free.
Furthermore, the FSA has a similar purpose to HSA, allowing participants to pay for medical treatments such as insulin or acupuncture.
You can also purchase equipment like blood sugar testing supplies or reading glasses or get over-the-counter items like bandages and pain relief drugs.
The FSA is one of the most beneficial ancillary products. Health insurance policies are rarely so comprehensive that you don’t need any supplemental benefits, so opting for an FSA can solve many problems.
The only downside to FSAs is that they eventually expire if the employer chooses not to roll them over to the following year.
Another tax-free ancillary benefit is the Health Reimbursement Arrangement or the HRA. It allows employers to reimburse their employees for any qualifying medical expenses.
You can find the complete list of qualifying medical expenses on the official IRS website, but the top items include ambulance and emergency health services, body scans, dental surgery, eye examination, and many others.
Some small businesses use HRAs as primary health insurance, but they are more frequently utilized as ancillary cover. Private health insurance providers might offer group coverage Health Reimbursement Arrangement of GCHRA that includes a custom monthly allowance for the listed out-of-pocket expenses.
Employers can also offer employee stipends or “fringe benefits.” This is a fixed sum provided to the employees for various expenses, including healthcare and other work-related expenses.
Unlike the FSA and HRA, employee stipends are taxable because they can be offered to employees independently from health insurance and regardless of their employment status. Therefore, even part-time employees can be eligible for employee stipends.
Another term for this type of ancillary insurance is catastrophic illness insurance, and no one ever wants to imagine needing this kind of coverage.
The standard health insurance plan doesn’t always fully protect an employee, leaving them feeling uncertain and uneasy.
A critical illness and accident insurance ancillary plan covers the expenses in the event of a stroke, cancer diagnosis, and even organ transplant.
This ancillary insurance policy covers the living expenses of a person who can no longer work due to disability. In many ways, disability insurance is similar to critical illness and accident insurance and can be either short-term or long-term.
The premium for disability insurance is calculated through many factors like age, occupation, and overall health.
A popular form of ancillary benefits is wellness programs. These benefits can be anything the employer chooses, including annual gym memberships, healthy meal plans, flexible work hours, massage treatments, and even yoga classes.
A wellness program can even include an incentive to use public transportation like bike-sharing or offering free bus passes.
Many employers choose to sweeten an employment contract with excellent childcare benefits, another form of ancillary insurance.
The lack of affordable childcare is a major problem for many employed parents, so having access to onsite daycares, childcare subsidies, childcare center discounts, and even flexible working hours can make all the difference.
Not everyone knows that you can get pet insurance as an employee benefit, but this ancillary benefit is getting more popular.
Apart from being a fantastic recruiting tool, pet insurance can be a real stress relief to the employee and reduce absenteeism caused by going home to tend to their pet.
Tuition assistance or tuition reimbursement is a form of secondary employee benefit for which the employer pays a certain amount of college tuition or education credits.
These programs are designed to provide career betterment to employees that have been in the company for a while.
This is often a win-win situation for both employer and employee, though not everyone will qualify for this type of ancillary benefit.
Incorporating various recognition programs might not be an ancillary benefit in the most literal sense but could fall into the category due to its purpose.
Employees who feel recognized at work are more likely to enjoy their job, maintain their productivity, and feel better overall.
An employer can offer an employee of the month of the year awards or organize appreciation events or office outings. But they can take it further and offer extra paid time off, free meals, or paid training opportunities.
Probably the most significant upside of ancillary benefits is the potential access to dental, vision, and hearing coverage. All three tend to get worse with age, and having access to preventative care can lead to a better and happier life.
The same applies to having access to pre-tax funds that cover specific expenses. Having peace of mind can change an employee’s attitude towards their work and help them feel like they are valued.
Finally, when the risk is shared between a large group of people, the ancillary insurance plan premiums are typically quite reasonable.
Employers have many excellent reasons to offer ancillary cover. Private health insurance providers often encourage businesses to include ancillary products to promote employee retention and productivity.
Including ancillary benefits to their employees puts companies ahead of their competition and earns them a good reputation. While ancillary benefits should never be used to mask insufficient health insurance coverage, they can be a phenomenal tool for making the workplace more appealing.
Finally, if an employer takes advantage of Section 125 or the “Cafeteria” plan, an IRS code that allows employees to use non-taxable funds, the employers are subject to lower payroll tax.
Before buying an ancillary insurance policy, it’s essential to do extensive research on the subject. The employers should ask themselves several important questions, like:
These are some of the questions to think about, but there are certainly those that are unique to your organization.
When you know which ancillary benefits to offer or at least have a decent idea, you have two options ahead. Either go to a health insurance marketplace and purchase ancillary plans directly or use a reliable broker.
Using an insurance broker offers several benefits. They are most likely to give you unbiased advice and save you time.
Brokers can manage many things at once, including keeping businesses compliant with regulations, introducing software, and operating cost control benefits.
Ancillary employee benefits are not only becoming more popular but can be seen as a primary differentiator between employers.
In some industries, ancillary benefits are almost presumed, and employees will expect dental care, stipends, and pet insurance.
Naturally, these benefits can’t replace traditional health insurance, but they can be the final “pro” item on the pros and cons list when choosing between two employers.
Keeping talent and reducing turnover is an essential goal for many employers, and carefully crafting the ancillary benefits programs can lead them in the right direction.
Are you looking for an insurance broker who can help you manage all employee benefits? Reach out to Taylor Benefits Insurance agency and get a free proposal.
Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.
Todd Taylor with Taylor Benefits gives our small business the kind of personal service we need. Insurance benefits are important to our employees and Todd helps us find a balance between benefits and value. Todd responds immediately to my phone calls & e-mails. He has even gotten in touch with me on a Sunday when we were in need of coverage answers immediately. We are very pleased with the hands-on service Todd and his staff provide.”
-Ken and Linda Orvick, Orvick Management Group, Inc.
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