Employee Benefits Services

Employees are looking for healthcare in their benefits packages. How can you offer a plan while still being mindful of your bottom line?

In response to the shockwaves through the workforce generated by the COVID-19 pandemic and Great Resignation, businesses have boosted their benefits packages, especially those related to healthcare. For employers, learning how to reduce employer healthcare costs can be overwhelming. However, doing so is important.

Providing healthcare benefits and managing the associated costs is critical to staying competitive in attracting and retaining employees as well as safeguarding the productivity of those employees. The Paychex Pulse of HR Survey 2022 reveals that 72 percent of employers offer health benefits compared to only 61 percent before the pandemic. And as high as 88 percent of employers rank health-related benefits as extremely important according to the Society for Human Resource Management's 2022 Employee Benefits Survey.

When it comes to reducing healthcare costs, where do you begin? In 2022, healthcare premiums for the average family were $22,463 reported by the Kaiser Family Foundation. This is a tremendous financial burden for many workers. As an employer, you want to offer your employees the best possible healthcare benefits at a cost you can afford. Understanding how health insurance premiums are calculated, costs that are under your control, and ways to reduce employer healthcare costs can help you select a healthcare plan that is the best fit for your business.

Who Sets Group Health Insurance Premiums & How Are They Calculated?

Each state has its own set of regulations for group health insurance, making where you do business one of the most important factors affecting your premiums. Insurance carriers calculate premiums based on applicable regulations along with your group's age, whether the employee is insuring an individual or a family, and tobacco use to calculate the premiums you pay for different plan types. Under the Affordable Care Act (ACA), an individual's health, medical history, or gender cannot affect their premium.

When searching for a health plan for employees, small businesses can benefit from the Small Business Health Options Program (also known as SHOP). This program provides qualified smaller companies with options to offer employees quality health and dental care plans. Participation in SHOP is required to qualify for the small-business healthcare tax credit, which can equal up to 50 percent of their healthcare costs. Managed online, the SHOP marketplace is a resource that offers several healthcare plan choices by state. If a business qualifies, it can enroll and administer the programs online.

Which Healthcare Costs Are Under Your Control?

Research from the Kaiser Family Foundation shows that the average small employer contribution for single coverage in healthcare premiums in 2022 was $8,012 (for large firms it was $7,873). Multiply this amount by your number of employees and you can see how even a small cost-control measure can make a big difference to your budget. Some of the important factors affecting costs are under your control as an employer, and carriers often structure their plan offerings around them. Here is a look at some of them:

1. Carrier: Identifying the best insurance carrier for your business is a key component in managing costs. Your plan premiums may be higher or lower depending on your choice of insurance carrier.
2. Deductible: Plans with high deductibles typically feature lower premium amounts and vice versa. You can choose which plan or range of plans provides the best balance of coverage and affordability.
3. Copay: Offering a plan with a higher copay amount may help to reduce plan premiums. Lower copays for participants usually translate into higher premiums.
4. Prescription: Coverage for prescriptions may be offered separately from your company's main health insurance plan, or not at all. In most cases, the more your prescription coverage pays for generic to highly specialized name-brand medications, the higher the premium amount.

7 Ways To Reduce Employer Healthcare Costs

Healthcare costs can be difficult to manage, which is why it's important to take time to research additional options early in the year. Here are some ideas for reducing healthcare costs and making the most of the dollars spent.

1. Shift to Plans With Higher Deductibles and Health Savings Accounts (HSAs)

Requiring employees to contribute more to their health insurance is one of the more common employer strategies for reducing healthcare costs. Be aware, however, that employees are financially burdened and typically have little room to absorb more monthly expenses. Shifting to plans with higher deductibles while also offering the tax and retirement benefits of an HSA can help everyone stretch their dollars. In fact, retirement plan benefits came in as the second most popular benefit offered by companies with 20 to 500 employees according to the Paychex Pulse of HR Survey 2022. An HSA is a solution for both.

2. Improve Employee Education About Healthcare

Employees can be given the opportunities to reduce their healthcare costs, and, in turn, their employer's healthcare costs, but they need to be informed consumers to act on those opportunities. It's up to you, the employer, to provide accessible, helpful information that educates and empowers employees to take full advantage of their benefits.

Companies can host employee seminars to teach employees about their health plans and how to reduce their costs — whether that's using urgent care centers instead of emergency rooms when appropriate or understanding how to read their medical bills and review for errors. More tools are also becoming available to allow employees to better compare the costs of care. Regular education and information dissemination may also be needed to connect employees to other employer-sponsored health benefits.

3. Telehealth

Going to the doctor can be time-consuming and difficult. With the advancements in video conferencing through a computer, smartphone, or tablet, telehealth has become an acceptable, alternative healthcare delivery method. Not only is telehealth convenient, but it's one way to help mitigate healthcare costs for you and your employees. Its efficiency makes it less expensive and a more affordable option than an office visit.

4. Wellness Programs

Wellness programs can heighten employees' awareness of their health, which encourages better choices and behaviors. Such efforts may lead to a lower number of claims and higher levels of productivity along with employees who feel physically and mentally healthier and thus more engaged with their work. Smoking cessation programs, fitness class discounts, diabetes management, biometric screenings, stress reduction, and even organized activities sponsored by the business can encourage healthier behaviors.

5. Work/Life Balance

The COVID-19 pandemic thrust the issue of work/life balance into the spotlight and employees' response ushered in the Great Resignation. The Paychex Pulse of HR Survey 2022 reports that incorporating work/life balance into the company culture is one strategy HR teams are using to help employees prevent burnout and manage stress, both of which negatively impact physical and mental health. Supporting remote and hybrid work situations and offering an employee resource group (ERG) are just two of the low-cost strategies employers can use to reduce healthcare costs through a work/life balance approach.

6. Healthcare Assistance Programs

Offering additional healthcare benefits may seem like an odd strategy for how companies can reduce healthcare costs. But providing assistance services can help manage healthcare costs in the long term. Research the cost of an outside or supplemental healthcare assistance service or ask your insurance provider if they have any offerings. Hotlines and other forms of communication such as texting, chats, or video conferencing staffed by nurses, coaches, or other licensed, experienced personnel can help employees with basic health issues, specialist referrals, or even insurance questions. Programs that manage asthma, diabetes, chronic pain, obesity, addiction, and other chronic diseases are another area that can benefit your workers and may reduce employer healthcare costs over the long haul.

7. Deductibles and Co-pays

Companies looking to reduce healthcare costs may consider changing current deductibles or employee co-pays. For employees who rarely visit the doctor outside of preventative screenings, paying more per visit may be preferable to an increased healthcare premium amount subtracted from their bi-weekly paycheck. Understanding how your workforce uses health plans can help you choose a plan that works well for everyone. Deductibles and other forms of cost-sharing, especially for individuals or families with low-income levels, could take up a large portion of a worker's paycheck. Conversely, you want to help make sure your employees understand their options so they can be prepared in the event of a medical emergency.

Select the Right Healthcare Plan for Your Businesses Needs

With many types of group insurance offered through different carriers, it can be difficult to know exactly which plan will help ensure that you and your employees have the appropriate coverage.

The more options you explore when choosing an insurance plan, the closer you can match the insurance needs of your business and employees to your budget. Engage a dedicated insurance agent to help you determine the best way to control costs.

Disclaimer: Insurance sold and serviced by Paychex Insurance Agency, Inc., 225 Kenneth Drive, Rochester, NY 14623. CA License #0C28207.

Although they offer similar types of coverage, voluntary and individual health and benefits packages differ in critical ways. Read this article to get a better understanding of which option can better fit the needs of your employees and your business.

What Is Individual Insurance?

Individual insurance, sometimes also called individual benefits, is a health plan that covers a single employee, with an option to add coverage for that employee's eligible family members. If the business consists only of a single consultant, freelancer, or sole proprietor, individual health plans may provide necessary medical coverage in a situation where group health coverage may not be available. Individual policies can also be tailored to the individual employee's needs, and employees can shop around for their ideal individual health insurance plan instead of using one chosen by their employer. Coverage can include:

1. Health coverage that provides the insured and eligible dependents with medical insurance for doctor, urgent care, and hospital visits and prescription coverage.
2. Vision coverage that provides the insured and eligible dependents with discounted rates or insurance coverage on eyeglasses, contacts, annual eye exams, and other vision care.
3. Dental coverage that provides the insured and eligible dependents with either insurance or discounted rates for preventative and curative dental care.
4. Long- and short-term disability insurance that provides financial compensation in the event the employee is injured and must take a significant amount of time off work because of the injuries (typically longer than two weeks).
5. Life insurance provides a large financial payout to a named beneficiary upon the death of the insured. Life insurance plans can be in the form of term insurance, which only guarantees protection for a specified time period (typically 10 or 20 years), or whole life insurance, which guarantees coverage for the insured's entire lifetime as long as the policy premiums are paid when due.

How Does Individual Health Insurance Work?

As the name implies, individual insurance is paid for, out of pocket, by a single person rather than a discounted group rate. Individual insurance plans are well-suited for independent contractors, freelancers, and other self-employed individuals as well as unemployed individuals or employed individuals who want a plan that is different than the ones offered by their employer. Individual health plans can be purchased through the federal or state healthcare marketplace or private carriers. In both cases, an individual signs up or makes changes to their individual health insurance during their open enrollment period.

Why Might a Person ChooseTo Buy Individual Health Insurance?

There are times when a person may opt for individual health coverage. There may be coverage gaps in an employer's benefits plan, especially if a person or their dependents has special needs or another unique situation. An employer may be forced to downsize and reduce staff. In the event the employer's workforce is less than 50 full-time employees or full-time equivalents, the employer may stop providing health care coverage. If a worker has lost group health insurance coverage, individual health plans are an alternative.

What Are Voluntary Benefits?

Voluntary benefits, also called voluntary insurance or supplemental benefits, are additional insurance offerings that employees voluntarily choose to add to their workplace benefits package. Many of these benefits are fully funded by the employee, which makes them an attractive offering for employers since there's no direct cost to the business. Even though employees shoulder the cost, many workers still highly value this benefit, since it provides an opportunity to purchase valuable offerings at a group discount that would otherwise be unavailable to individuals.

How Do Voluntary Benefits Work?

Voluntary employee benefits can augment an employer's benefits package by offering an array of products and services at no or low cost as additional employee perks. There are many reasons why voluntary benefits are an important part of employee benefit options. Because a worker chooses which benefits are most valuable to their needs and lifestyle, they can choose perks that directly improve their overall quality of life. Voluntary benefits and voluntary insurance allow workers to personalize their benefits to give them greater peace of mind and improved work-life balance. Voluntary benefits can include:

• Health and Wellness: These can include programs, apps, and classes in weight management, healthy lifestyle coaching, stress management programs, addiction, smoking cessation, and diabetes management. There may be discounts for gym memberships and insurance programs for vision, dental, and life, or supplemental insurance for disability and acute illnesses such as cancer.
• Lifestyle: These perks may come in the form of reduced costs for pet insurance, car insurance, public transportation passes, or recreation passes to parks, sporting events or other places like ski resorts or other activity-based areas.
• Financial: These voluntary benefits help an employee improve their financial fitness with mortgage protection insurance, student loan repayment programs, tuition assistance, legal advice, or classes that teach financial literacy.
• Security: This can include everything from identity theft coverage to home mortgage insurance.

Why Offer Voluntary Benefits?

Voluntary benefits may play a strategic role in the overall success of a business. According to the 2022 Paychex Pulse of HR Survey, one in three HR leaders says the competitive hiring environment and its associated high turnover is putting stress on their team members and on current employees who are working to compensate for staff shortages. Using a creative and attractive voluntary benefits package is one way to help an employer stand apart in attracting and retaining high-quality employees.

Once onboarded, voluntary benefits for employees play another role. They may help your workforce achieve a healthier work-life balance and happier lifestyle, which can reduce sick days (and health insurance premium costs) while increasing productivity, engagement, and creativity. These outcomes may ultimately help a business increase its bottom line and fortify its resiliency all while establishing and strengthening its reputation as a desirable place to work. As you assess benefits, consider talking to your employees about what would be most valuable to them. There are always new and creative options becoming available to help you, your business, and your employees.

Individual Insurance vs. Voluntary Benefits Insurance

Understanding the similarities and differences between individual insurance and voluntary insurance coverage is critical to finding the right package that allows a business to optimize funds and offer competitive employee benefits. Done strategically, it can also help employees assess their individual benefits vs. voluntary benefits and make decisions that are the most advantageous to their overall health, happiness, and financial needs.

Individual Insurance vs. Voluntary Benefits

Similarities

• Both can be customized by the employer and the employee. Business owners can choose benefit options that work best with their budget and employees' needs. From these choices, employees can select the coverage options that are best for their needs, family size, and financial situation.
• Both cover dependents such as a spouse or children for an additional charge.
• Both can cover a variety of benefits. Dental vision, disability, and life insurance can be provided through an individual policy or voluntary benefits, as well as health insurance depending on the number of full-time or full-time equivalent employees and state regulations.

Differences

• Voluntary benefits are sponsored by the employer and are only available to employees. Additionally, the employer chooses which benefits will be offered and the corresponding coverage levels, giving employees more affordable access, but less flexibility than with an individual plan.
• Individual insurance is paid for entirely by the employee. It's up to an employer to decide if the business will cover none, some, or all of the costs of their benefit options.

Similarities Between Individual Insurance and Voluntary Benefits Insurance

Both individual insurance coverage and voluntary benefits can be of value to employees. They share some notable similarities:

1. Both insurance types are customizable. When choosing an individual plan or when choosing voluntary benefits, individuals can select the coverage options that are best for their needs, family size, and budget.
2. Both insurance types can cover dependents. With both individual insurance coverage and voluntary benefits options, eligible dependents, such as a spouse or children, can be added to the policies for an additional charge.
3. Both insurance types can cover a variety of benefits. Dental, vision, disability, and life insurance are just a few examples of coverage that can be provided through either an individual policy or voluntary benefits.

Differences Between Individual Insurance and Voluntary Benefits Insurance

Although individual insurance and voluntary benefits can both be used to provide well-rounded coverage in a variety of situations, there are few significant differences between these two coverage types.

1. Voluntary benefits are sponsored by the employer. Since voluntary benefits options are only offered through an employer-sponsored plan, individuals who are not employed will not have access to these options. Additionally, the employer chooses which benefits will be offered and at what coverage levels, giving employees less flexibility than with an individual plan.
2. Individual insurance is completely paid for by the employee. While many business owners will pass the full cost of voluntary benefits on to their employees, this isn't a requirement. Some employers will cover a portion of voluntary benefits elections for their employees. With individual insurance coverage, however, the employee bears the entire cost.

Ensure Your Employees Have the Benefits and Insurance They Need

In today's labor market, if an employee isn't getting what they need from your business, you risk having them look elsewhere for a more attractive employment package. This includes a benefits package that protects their health and enhances their lifestyle and overall well-being. The importance of employee benefits as a strategy for attracting and retaining high-caliber workers and helping them stay productive and engaged cannot be overemphasized. Are you an employer looking to get started with individual and voluntary benefits insurance? Experts in benefits insurance can help.

Over half of U.S. states have enacted legislation requiring private-sector businesses of a certain size to participate in a state-facilitated IRA program if they don’t currently offer an employee retirement plan. Businesses that don’t comply could potentially incur state penalties. Employers can choose a retirement plan from a non-government provider as long as it meets state requirements.

Across America, many states are experiencing a retirement savings crisis. For example, in Connecticut, 600,000 working people still have no access to retirement plans. In New York State, that number is in the millions. The Federal Reserve reports that roughly a quarter of non-retired adults have no retirement savings.

To deal with this crisis, 14 states and two cities have enacted legislation and five have been fully implemented programs. Of the enacted states, almost all are mandatory except for Massachusetts, which has proposed legislation to make it mandatory for for-profit businesses, as well as New Mexico, Vermont, and Washington.

Enacted: Maryland, Colorado, Connecticut, New York state, New Jersey, Virginia, Maine, Vermont, and New Mexico, and the city of Seattle, WA.

Fully implemented and active—California, Illinois, Massachusetts (for non-profits), Oregon, and Washington

Check the status of your state at our online resource center. 

State Retirement Programs, at a Glance

If your business already offers a workplace retirement plan, you may register for an exemption from the state retirement program. If you have a business without a retirement plan, however, you might need to comply with the state’s (and/or the state where your employees work) program requirements or risk potential penalties. While every state is different, most state-facilitated retirement programs:

• Are designed as Roth individual retirement accounts (IRAs)
• May be mandated for businesses employing a certain number of employees
• Use investment firms and investments chosen by the state
• May require employers to automatically enroll employees at a contribution of three to five percent of each employee’s payroll wages
• Allow workers to opt out of contributing via payroll deduction
• May require employers to do some administration

Also noteworthy is that a business located in a state without a mandate to offer a workplace retirement plan might still have obligations regarding a workplace retirement program if they have employees working and reporting income in a state that has such a mandate. For example, Wisconsin does not have a state retirement savings program mandate, but the state of Illinois does have a mandate. A business located in Wisconsin that also has the requisite number of employees working and reporting income in Illinois would be required to register for the Illinois Secure Choice Savings program for those employees or offer a private retirement plan for them that satisfies the mandate. If it is the latter, the employer would have to file for an exemption with the state of Illinois and demonstrate proof of their private retirement plan.  

Another thing to consider is that unlike 401(k) plans, state-facilitated IRAs are not eligible for up to $16,500 in SECURE¹ Act tax credits. Their contribution limits are not as high as 401(k)s. Many state programs also require the employer to do their own plan administration—filing, reporting, adjusting contributions limits, and more. This can be burdensome to smaller businesses that don’t have the time or staff to do complex plan management.

Update on the States

Here is a brief update on the enacted state-facilitated retirement programs as of November 2022.

California

The CalSavers program offers a traditional IRA in addition to a Roth IRA, and has oversight from a public board of directors. Recent legislation expands the program to almost all employers with at least one employee (sole proprietors are excluded). Employers must register for the program by Dec. 31, 2025 or offer a private plan that meets the state mandate. CalSavers has begun to notify businesses about penalties for noncompliant employers.

Colorado

The Colorado Secure Savings Program requires businesses with five or more employees to offer a workplace retirement program. The state implemented its program and employers can begin registering. There are phased-in deadlines in 2023 for different business sizes. 

Connecticut

Connecticut launched the MyCTSavings retirement savings program in early 2022 and established deadlines for businesses to register their employees. Businesses with 5 or more employees must register by Aug. 31, 2023. This program requires businesses with five or more employees and no retirement plan to participate in a state-facilitated IRA program. Noncompliant employers may be subject to civil action and court fees if they fail to enroll an employee in a timely fashion.

Delaware

The state has a proposed launch of Jan. 1, 2025 for Delaware EARNS (Expanding Access for Retirement and Necessary Savings), a mandatory state-facilitated retirement savings program (Roth IRA). Businesses with five (5) or more employees that have been in operation for at least six months must register for the state program if they already do not have an auto-IRA plan for all employees or sponsor a qualified retirement savings plan. Any employee 18 years of age or older who receives wages in Delaware qualifies to participate and there is an employee opt-out option. Contribution amount per pay period will be 3 percent to 6 percent. There is an annual auto-escalation of 1% or 2% with a maximum of 15%. Any business failing to comply will face a penalty of $250 per employee per year, up to a maximum of $5,000 per year.

Hawaii

The state has created the Hawaii Retirement Savings Program, a mandatory state-facilitated Roth IRA program that every business in operation for at least two years with at least one (1) employee must participate in, if they have not maintained a qualified retirement plan within the past two years. The state has not set a launch date yet but certain parameters do exist, including an employer requirement to notify employees of the opt-in and the employee's option to opt out. Presently, the contribution amount default will be 5% per pay period, but this is flexible.

There will be penalties for failure to provide written notification to employees of the opt-in, as well as financial stakes that include making up missed contribution amounts in the amount each covered employee would have contributed (plus 6% interest rate). In addition, there will be a penalty of $25 for each month the covered employee was not enrolled in the program and $50 for each month they continue to be not enrolled after the date the original penalty is assessed.

Illinois

The Illinois Secure Choice Retirement Program is a mandatory state-facilitated Roth IRA savings program that plans to send enforcement notices to noncompliant employers starting in 2022. Employers that do not comply may face penalties of $250 per employee for the first year, and $500 per employee for each subsequent year depending on business size. One more wave of implementation is also planned: employers with 5-15 employees must register by November 2023.

Maine

Tentatively scheduled to launch Jan. 1, 2025, employers with 5 or more employees who have been in operation for at least two years and have no retirement plan will be required to participate in the Maine Retirement Savings Program. The registration deadlines have been postponed, but noncompliance penalties have been established. The program will be auto-enroll with an opt-out option, plus there will be a 5% default contribution limit (flexible) that includes an auto-increase of 1% annually, up to 10%. Self-employed and individual contractors are expected to participate.

Maryland

The MarylandSaves program requires businesses of all sizes to offer employees automatic enrollment in a payroll-deduction IRA. The MarylandSaves program launched in September 2022.

Massachusetts

Massachusetts legislation differs from other states in that it applies only to the non-profit sector. The Massachusetts CORE Plan is voluntary and allows non-profit organizations with 20 or fewer employees to participate in the 401(k) multiple employer plan (MEP) administered by the state. Participants must have payroll administered by an eligible third party.

New Jersey

The New Jersey Secure Choice Savings Program requires employers with 25 or more employees who have been in business for at least two years to offer a retirement plan (Roth IRA, with a traditional IRA as an alternative election). Smaller or newer employers can join voluntarily.

New Mexico

New Mexico is planning to launch a mandatory program by July 1, 2024 that offers a Hybrid Roth IRA or Marketplace plan. The program will have auto-enrollment and give employees the choice of opting out. Businesses with 5 or more eligible employees are required to offer eligible employees a chance to enroll or opt out.

New York

The New York State Secure Choice Savings Program was originally voluntary, but legislation has been passed to mandate participation in the program for businesses with 10 or more employees. Eligible employers had to have been in business for at least two years and without a qualified retirement plan for the two years prior.

Oregon

The OregonSaves program has made great strides in helping private-sector workers who don’t have access to workplace retirement plans. Employers are currently required to automatically enroll employees in the IRA savings program if they do not offer their employees a retirement savings plan. Businesses with 3-4 employees are expected to register for the program by March 1, 2023 while businesses with 1-2 employees have a July 31, 2023 deadline to register. The employer penalty for non-compliance is $100 an employee, up to $5,000 a year.

Vermont

The state began planning to implement the Green Mountain Secure Retirement Plan in 2017, a voluntary multiple employer plan (MEP) designed for employers with 50 or fewer employees. However, the contract with the plan administrator expired and the program is on hold. 

Virginia

Tentatively scheduled to launch on July 1, 2023, RetirePath Virginia requires employers with 25 or more employees to participate if they have been in business at least two years and don’t offer an employee retirement plan. The goal is to offer nearly 800,000 private-sector employees a chance to start saving for retirement.

Washington State

About 131,000 Washington State businesses don’t offer workplace retirement plans. That translates to roughly 2 million employees with no retirement savings. In response to this crisis, the state has established its Retirement Small Business Marketplace to help small companies adopt retirement savings programs for their workforces. Participating financial service providers offer low-cost plans to employers with 100 or fewer employees, including sole proprietors and the self-employed.

The marketplace currently offers SIMPLE, Roth, traditional IRAs, and 401(k) plans to choose from, based on the type of business and the individual’s financial planning goals.

Regardless of Your State, You Do Have Choices

Some of the state retirement savings programs may be “mandatory”, but employers have the option to adopt a qualified retirement plan that exempts them from participating in the state program. In some cases, a state-run IRA may not be the best fit for your business. For example, you may prefer a traditional 401(k) plan that has higher contribution limits for employees. Or you may prefer a plan that requires less time, staff, and cost to manage, like the Pooled Employer Plan (PEP). It all depends on your business needs and the savings goals of your employees. When in doubt—be sure to compare your options.

¹Setting Every Community Up for Retirement Enhancement. Under the SECURE Act, eligible new plans can potentially get up to $5,000 per year for three years in new plan tax credits with an additional $500 per year with auto-enrollment.