Getting Started with Employee Benefits
Whether your business is a startup or well established, starting a benefits plan may seem daunting or out of your current budget. But the great news is that there are alternatives out there, like a health spending account (HSA), that still provide your employees with valuable coverage.
If you’ve never heard of the concept before, an HSA is a specified amount of money that is allotted to each class of employees in your business. The employees are able to use this money for any CRA-approved medical expense.
Here’s an example:
- You’re a 10 person startup that wants to offer their employees benefits and have a plan in place to support your growth and attract top talent. Budget-wise, you’re limited as there was no room for benefits in your budget originally.
- If you start with an HSA, you may give each employee a set amount (say $500) a year for benefits. As a business you pay-as-you-go, so of the $5,000 of total room given to your 10 employees to spend ($500 x 10), they may spend less than 100% of the money allotted to them.
- There is also the ability to set up an HSA to match a traditional plan design for reimbursements. For example, the plan could cover dental claims only at 80% co-insurance or eye exams, but not glasses - the design is up to you! Don’t worry, we can help you design a plan that is best for your business.
Many business owners ask why they would look at traditional benefits after learning about an HSA. Since an HSA can cover health and dental costs for employees, why would you pay for traditional benefits?
There are 2 main factors missing from an HSA that are included in a traditional employee benefits plan: pooled benefits and catastrophic health coverage.
Pooled benefits include life insurance, critical illness insurance, disability insurance among other benefit lines. The rates for these benefits come from your company’s risk level, demographics and an insurance company’s claims experience for each line of business. Since an HSA only covers health and dental, using an HSA on its own will not cover your employees for larger life events such as a disability or illness. As the employee benefit landscape changes, many insurers are moving towards offering an HSA as an added layer on top of their pooled benefits instead of a traditional insured plan.
Catastrophic coverage pertains to covering health expenses beyond a set amount. For example, this will provide coverage for health expenses over $1,000. Think of the first $1,000 spent on health claims as a deductible. By paying a monthly premium, you are able to add this catastrophic coverage to a benefits plan. Your HSA allotment can cover a base amount (say $1,000 per employee per year to match the deductible) and once an employee has spent $1,000 on health claims they can continue having coverage after using up their HSA.
The monthly premium for catastrophic coverage can be significantly less than the premium of a traditional plan, as the biggest part of a traditional plan’s cost is to cover a few health and dental claims from each employee (which an HSA would cover in this case).
Depending on your business's budget, you may want to add an HSA by itself or you may want to include catastrophic health coverage or pooled benefits to further protect your employees.
To learn more about these options, speak to an HMA advisor today. We are happy to help!