Employer-paid benefits (sometimes explicitly referred to as 100 percent employer paid benefits) is an unusual offering that provides workers with access to some or all of their employee insurance coverage at no cost.
While many companies share the cost with their workforce, most don’t pay the entire bill. In fact, worker contributions have been increasing over time, both as an absolute dollar amount and as a percentage of the total cost, according to research reported by the Kaiser Family Foundation. For example, covering a family for health care in 2011 cost an average of $15,073. Of that amount, the employer share was $10,944, while the employee contributed $4,129. In 2021, comparable family protection cost $22,221, with the employer paying $16,253 and the employee responsible for $5,969.
Often, companies are more likely to pay 100% of costs for individual employees than for family enrollment. According to the same Kaiser study, twelve percent of companies will pay the entire price for enrolling just the employee. In comparison, only four percent of companies will pay the total for family coverage. As a result, employees in small companies are more likely to receive fully paid health care than those in larger firms.
Although workers in small firms have a greater opportunity to receive fully employer-paid health care coverage, for those that do contribute, they typically are required to pay a higher percentage of the cost than workers in larger firms, when the plan includes their families. For example, in small companies, workers contribute 37% of the cost of family health insurance, compared to 24% for employees in bigger companies. Interestingly, for those workers in companies with a high percentage of lower-paid employees, the average contribution rate is higher than that for family coverage in companies where workers have higher median wages.
The premiums for coverage are not the only cost and may not be the most significant part of the employee’s expense. Most workers also have a deductible in addition to the premiums, which almost always comes out of the employees’ pockets directly. Deductible frequency and amounts have increased quickly over the last ten years as insurers look for ways to hold down premiums. Many plans also include copayment amounts that the employee is responsible for after meeting the deductible requirement. These are typically imposed for the same reason. So-called “high-deductible” plans constitute a growing portion of the offerings because employers and insurers can provide them at a lower premium. Workers may accept them for the same reason—trying to reduce ongoing expenses in the hope that they won’t need to use the coverage and pay the required deductibles and copayments.
Health insurance and other benefits are vital recruiting tools. In fact, savvy prospective employees evaluate the benefits package along with the salary when considering a job offer. Doing so makes sense if you consider that paying hundreds of extra dollars per month for your medical coverage can quickly eliminate the advantage of a pay increase for new hires switching jobs.
Recent surveys in both the U.S. and the U.K., as presented by the prestigious Society for Human Resources Management, indicate that most employees would trade some salary for better benefits and would like to hear more about them during the recruiting process. That’s especially true for employees with families. Specifically, employees want to know more about health insurance, according to another survey conducted by HR software firm Zenefits.
Since the Affordable Care Act passed, employers with more than 50 full-time workers (or the equivalent of part-time employees) must offer specific benefits to their employees or pay the penalty known as an employer shared responsibility payment. The coverage provided to employees and their dependents (a spouse is not a dependent, but the term typically does include children) must meet the definition of affordability based on a percentage of household income. That can be tricky since the employer may not know the details of their employees’ household income. Still, they can meet the requirement by fulfilling specific standards (referred to as affordability safe harbors) detailed by the IRS. The plans must meet minimum essential coverage standards, minimum value, and other requirements.
Labor unions not only bargain for pay increases for their employees (and safety rules, which was the foundation of union growth in the industrial era of the United States), but also for better benefits coverage. Across the U.S., ten percent of workers belong to a union, with several states having double that percentage. Overall, unionized employees are 92 percent more likely to have health benefits than nonunion workers due to the collective bargaining process. In many cases, unions even administer the benefits, working hard to keep the coverage costs down to help preserve it.
According to the U.S. Bureau of Labor Statistics, while less than 70% of nonunion employees have some access to healthcare benefits, the availability for union workers is over 90%. The disparity in access is similar for dental and vision coverage as well as prescription assistance. Across the spectrum of union and nonunion employees with access to health insurance benefits offered by their employer, the participation rates are higher for union employees, possibly signaling more attractive terms.
Whether due to the ACA requirements or the interest in recruiting and retaining high-quality workers, most employers offer health care insurance, whether partly or fully paid, for workers. For various reasons, not all workers use the benefits the company provides. Some may not be eligible due to waiting periods or status (often, temporary workers are not offered enrollment privileges.) Others may have access through a spouse or other family member or simply find that the offering is too costly.
Employers hoping to enhance their offerings and improve their appeal as an employer of choice may want to consult with one of our advisors at Taylor Benefits Insurance for additional information and guidance on crafting a benefits package.
We’re ready to help! Call today: 800-903-6066