Employer contributions are the unsung heroes of health benefits. Many companies get bogged down by the total costs and forget that they don’t have to foot the entire insurance bill on their own. Company contributions help spread out the amount between employees and employers so it’s easier for both sides to handle. Think back to the last time you went out for dinner with a group of friends. Chances are, you split the tab with a few people. Contributions are exactly like that, just with a little more health insurance mixed in.
In this article, we’ll run through the ins and outs of employer contributions so you can use them to contribute to an all-star benefits experience.
It all starts with the Affordable Care Act
The ACA? For employers and employees, it’s more like AC-yay. The Act states that employers need to offer health plans that follow both the minimum essential coverage and minimum value rules. The minimum value standard is a fancy term that just says employers have to provide health insurance that’s economical, comprehensive, and covers, on average, at least 60 percent of their medical care. Companies also have to ensure that their team’s premium contributions don’t surpass 9.66 percent of their entire household income. Basically, if a plan is too expensive, the ACA will stop it in its tracks.
Insurance carriers generally require that companies contribute to at least half of employee premiums. Despite that rule, many employers decide to take care of even more of the cost. However, remember that the decision is totally up to you. To give you an idea of how much employers pay, The Kaiser Family Foundation found that in 2015, companies contributed an average of 82 percent toward premiums for single health insurance and 71 percent for family coverage.
What does an employer contribution look like?
Imagine that Jillian is one of your employees at your toy store. She has a gold HMO, and her premium costs $250 a month. This is how one situation could play out:
Monthly health premium for Jillian: $250
- Your toy store pays: $220
- Jillian pays: $30
That means that for each pay period, Jillian will have $30 subtracted pre-tax for her health premium.
Let’s say you have four employees on the your team. Your company pays a chunk of the insurance bill for the entire team each month:
Monthly premium for Jillian, Jack, Joe, and Jerrold: $1000
- Your toy store pays: $880 collectively
- Jillian, Jack, Joe, and Jerrold each pay: $30
The same situation would occur for the rest of your team. If Jack has a higher premium than Joe, the numbers would adjust slightly, depending on how much you decide to pony up.
Helping folks out with their monthly premiums is loaded with superpowers. You grab a bunch of tax breaks, and so do your employees. But the most important after effect? The ability to bring total wellness within reach for your team.