Unlocking the Power of Supplemental Health Benefits

Beyond Coverage Executive Health May 13, 2024

As companies navigate one of the most competitive business landscapes in decades, employee health benefits continue to play a critical role in operational success. Today, HR warriors are feeling the pressure to do more with less when it comes to benefits. While protecting the bottom line is a top HR priority, so is nurturing workforce engagement and attracting and retaining top talent.

This economic paradox has fueled the introduction of compensation packages enhanced with innovative supplemental health benefits that extend value beyond the paycheck.

Health Benefits vs. Sign-On Bonus

Your first thought when strategizing on how to recruit and retain top talent, may be to offer a sign-on bonus or salary increase. While this tactic is familiar, cost-friendly, and traditionally highly compelling (who doesn’t like a bonus?), it comes with inevitable limitations and drawbacks. Perhaps that’s why recent trends have seen more employers electing to enhance perquisite menus with supplemental health benefits, giving them a strategic advantage.

To appreciate why supplemental health benefits are gaining traction, it’s important to understand the disadvantages of the alternative:

  • Treated as Ordinary Compensation: Employees often perceive sign-on bonuses as just another form of compensation, indistinguishable from their regular paychecks. Interestingly, surveys show that 90% of employees would prefer quality healthcare benefits over a pay raise.
  • High Cost: Despite their intended value, sign-on bonuses can become costly for companies once taxes are factored in. A $5,000 bonus, for instance, may end up costing the company significantly more while providing the employee with less actual value.
  • Risk of Insult to Current Employees: Providing sign-on bonuses to new employees as an incentive to join your company can inadvertently offend existing employees in similar positions. They might feel that they too deserve a comparable reward for their loyalty to the company.
  • Easy to Forget: While undoubtedly monetary motivation is an effective way to attract new talent, this benefit is “one-and-done,” so it’s easy to forget. Over time, employees may wonder, “What have you done for me lately?”— leading to potential retention challenges.

Health Benefits vs. Other Benefits

So, why invest in health benefits as opposed to other benefits or perks? The simplest answer: That’s what employees want. With steadily increasing healthcare costs, candidates are looking to join companies that offer employee benefits that can help address this need. Still skeptical? Consider these statistics:

  • Employee Preference for Health Benefits: Approximately 56% of U.S. adults covered by employer-sponsored health benefits consider their health coverage a crucial factor in deciding whether to remain with their current employer.
  • Job Satisfaction and Benefits: A significant 88% of employees rank health insurance as a top priority, higher even than benefits such as education and retirement savings, making it highly important to job satisfaction.
  • Health Insurance as Top Benefit: Health insurance consistently ranks as the #1 benefit according to employee preferences.
  • Impact of Healthcare Benefits on Recruitment and Retention:
    Over half of U.S. workers have switched jobs in pursuit of better benefits offerings.
    77% of employers offering supplemental insurance acknowledge its effectiveness in supporting recruitment, and 80% verify its role in retention.
  • Strategic Use of Benefits by Organizations: Companies that have adapted their recruitment and retention strategies to include enhanced health benefits, are outperforming companies that have not done the same:
    – Company performance: 58% vs. 34%
    Recruitment effectiveness: 19% vs. 8%
    Retention effectiveness: 28% vs. 11%

Cost-Effective Health Benefits

So, what about the cost aspect? It’s clear that health benefits are a crucial component to effectively attracting and retaining skilled employees, but there remains the persistent issue: Rising healthcare costs drive increasingly expensive primary plan premiums making it challenging for companies to offer comprehensive health benefits without straining their budgets.

That’s where supplemental expense reimbursed insurance comes in. Powerful in several ways, it can be the key to solving your health benefit cost/recruitment and retention dilemma.

  • Carve-Out Coverage: This type of supplemental health insurance qualifies as an excepted benefit, which means it’s exempt from ACA nondiscrimination rules. In other words, companies can offer these supplemental health insurance plans to select employee classes as defined by the employer. This empowers employers to keep primary health plans consistent for all employees while enhancing benefits for critical positions that are challenging to recruit and retain.
  • Powerful Supplemental Coverage: Supplemental expense reimbursed health insurance provides valuable coverage without disease or event-driven limitations, unlike indemnity-based voluntary supplemental plans. So, there’s coverage for routine health expenses and beyond. ArmadaCare’s expense reimbursed insured products ranges from $5,000 to $100,000 in annual coverage, providing options for all needs and budgets.
  • Tax-Efficiency: Unlike pay raises and bonuses, premiums for expense reimbursed insurance aren’t taxable. As a result, these plans end up costing less and offer greater value than equivalent bonuses or pay raises. Employees also receive tax-free reimbursements for out-of-pocket healthcare costs.*
  • Constant Reminder: Every time an employee uses their supplemental expense reimbursement plan throughout the year, they’re reminded of their employer’s appreciation. Another way to nurture employee loyalty.
  • Built-In Loyalty Program: Additionally, ArmadaCare’s plan designs can be leveraged into a multi-tiered loyalty program, where coverage levels increase the longer employees remain with the company. The plans can work similarly for a sales incentive program.

The Bottom Line

Current trends in the employee benefits market show an increasing number of employers electing to enhance their employee benefit menu with supplemental expense reimbursed insurance plans. No longer the costly, limited plans of yesterday, these tax-efficient*, flexible, robust solutions provide a strategic advantage for employers who want to remain competitive and relevant when recruiting and retaining.

With ArmadaCare’s supplemental expense reimbursed insurance solutions, the decision to optimize employee health benefits is a win-win. Learn more about ArmadaCare’s expense reimbursed insured plans today.

1 SHRM, 2021

2 AHIP: The Value of Employer Provided Coverage Survey, 2023

3 SHRM: Employee Benefits Survey, 2023

4 KFF, Employer Health Benefits Survey, 2023

5 Forbes; Best Employee Benefits Report, 2023

7 Gitnux; Critical Employee Benefits Statistics, 2023

8 NaturalHR; Companies with Effective Employee Retention Strategies, 2023

*This is not local, state or federal tax advice as each person and each company is unique. It is recommended that you seek the independent counsel of a professional tax adviser.

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