Employers are always looking for ways to save money and reduce costs. One popular option is to offer medical insurance as an employer-sponsored benefit rather than a salary increase.
There are advantages and disadvantages to providing your employees medical insurance, including:
Pros of Offering Medical Insurance as a Benefit
The first argument in favor of providing medical insurance is that premiums are deductible as an employee business expense, while salaries are not.
Since you will be able to take advantage of this deduction, it may enable you to stay within the limit of 50 employees or less for whom you can qualify as a small-business owner and thereby avoid some heavy taxes on your income.
Companies raising funding for their business may offer significant tax incentives for your company too.
Another argument in favor of providing medical insurance may be a significant incentive for top talent to join your company. If you have high-caliber employees, there is a good chance they have other job offers in their hands when they consider which company to work for. Providing medical insurance is one of the most significant factors that can help you convince them to join your company.
Private companies can offer their employees Medicare healthcare plans because it is cheaper than private insurance
There are two main types of Medicare health plans, and you should know the difference between Medicare Advantage vs. Medicare Supplement. If you do, your employees can get excellent medical insurance at a lower cost to you, meaning you can take advantage of government incentive programs.
Cons of Offering Medical Insurance
The biggest disadvantage is the cost of the insurance to your business. Many companies get discounts based on the number of employees they have, but it can still be expensive. There may also be follow-up expenses like copays and coinsurance that you will need to consider.
If your employees are used to receiving medical insurance through their jobs or other government benefits like Medicaid and Medicare. Saving money on healthcare costs is a big issue for businesses.
Another disadvantage is that if you offer medical insurance plans, your employees will forget about all the other benefits you offer. Since it is easy for employees to focus on medical insurance, they may feel that the other benefits you provide are not important.
If you want to show your workers how valuable you think they are, sometimes offering medical coverage is not the best option.
Some companies providing medical insurance for employees also opt to give their employees fixed rate increases instead of set percentage-based pay increases because the cost of medical insurance is increasing more than the average amount.
Administrative hassles are another disadvantage. If you are required to provide your employees with medical insurance, this means that you will have to file extra paperwork for them and manage their accounts regularly.
You may also need to hire an additional employee or outsource the task of processing claims so that there are enough human resources to handle all requests.
Finally, offering medical insurance is not only an expense for your company but also employees. Suppose they are covered under your medical insurance plan. In that case, you will be obligated to pay the premiums on their behalf, meaning that you will have more of your cash tied up in healthcare coverage rather than being available to put towards other company needs.
Providing medical insurance is not without its advantages and disadvantages. It may be the right choice for your company, but it is essential to weigh the pros and cons before making this decision. While you may attract top employees by offering medical insurance, it can also become a financial burden. In the end, it depends on your company’s unique situation and needs.