Coverage Options

There is a surprising degree of flexibility and creativity available in designing a benefits package that will help you attract and retain quality employees. But it has to be cost effective as part of your compensation budget. Knowing your options when you design your plan is critical to its ongoing usefulness and feasibility. Ask your Orr Insurance & Investment Broker to show you alternatives like the ones below:

Traditional Insured Plan

Administrative Services Only Plan

Health Spending Account

Health & Welfare Trusts

               

Traditional Insured Plan

The two most popular types of insured plan among small-to-medium size businesses are “refund “and “non-refund accounting” plans:

Non-Refund Accounting Plan: The insurer provides everything from Life and Disability insurances to Health & Dental. The premiums are largely based on statistics: demographics, industry classification, inflation, claims experience and a few other factors, all of which are reviewed annually.

Refund Plan: These plans are based on actual use, rather than statistical probabilities. They are fully insured, and f there is an under-use of the plan a decrease, or smaller increase, in premiums will be seen. If the plan is used more than expected and there is a net loss to the insurer, then higher premiums can be expected. Non-refund Accounting plans are a little riskier, but if there is a gain by the insurer, then the client actually gets a refund. If there is a loss however, the client goes into a deficit position and maybe required to pay back that deficit upon renewal. This type of plan is usually only available to businesses with more than 100 employees.

 

Administrative Services Only Plan

An ASO plan is best suited for claims that are predicable, short-term and generally not catastrophic. The employer provides benefits to plan members on a self-insured basis, covering claims from a trust account funded by monthly premiums, with “stop-loss” insurance as a safety net to cover claims that exceed a set dollar value. If claims go beyond the stop-loss level, the catastrophic insurance kicks in. Similar to a Refund Accounting plan, excess premiums are refunded at renewal – if there is a deficit, the employer tops up the trust account. This category is named for its potential savings in administrative costs charged by insurance companies.

Most insurers require 50-100 employees for this scenario, but Orr also deals with Benecaid, a company that will provide ASO benefits for as few as five (5) employees. Your Orr Insurance & Investment Broker can show you how an ASO plan could work for your company.

 

Health Spending Account

A Health Spending Account allows you and your employees to choose which health services you want to use. Funds are deposited into an account on a pre-tax basis, meaning the employee does not pay income tax on amounts deposited. When an employee incurs an eligible healthcare expense, they submit the bill and funds are reimbursed from the account. They do not become a taxable benefit.Since HSA plans usually contain limited funds, catastrophic insurance is put in place to backstop large claims.

 

Health & Welfare Trusts

Health & Welfare Trusts are similar to HSAs but are held outside of an insurance company. This tax planning technique is used by business owners and employees to supplement their benefits plan by having the corporation pay for the health expenses that would normally be paid out of pocket, in after-tax dollars.