Basic Health Insurance May Cost Nothing for Some Employers

There are very compelling reasons for an employer to offer affordable basic or *incentive-based health insurance plans to hourly workers. Chief among them is compliance with the Affordable Care Act Employer Mandate. However, many employers are misled into the belief that limiting contributions (within the constraints of ACA) or offering plans that technically comply with ACA but are priced too high for most hourly employees is a winning strategy.

We believe there are even more compelling reasons for an employer to contribute more, rather than less, to the up-front cost of sponsoring these plans. Brokers need to see the bigger picture and focus less on premium costs and contributions and more on ways these low-cost health insurance plans might be offered on a nearly cost-neutral basis.

The following are examples of employer expenses that can actually be reduced by the presence of a well-designed ACA compliant indemnity health plan.

*Incentive-based health insurance describes plans that eliminate deductibles and coinsurance and provide first dollar access with little or no out of pocket costs to the covered members.

1.     Employee Retention & Turnover – With virtual full employment along with chronic shortages of unskilled labor, industries that employ hourly workforce’s simply cannot afford to have high turnover. It is estimated that replacing an employee is equivalent to paying their salary for six months, this in addition to having to pay the replacement employee, places an unnecessary financial burden on these businesses. Creatively designing a low-cost health insurance plan with incremental increases in coverage levels, indexed in direct proportion to length of employment, will result in greater employee retention thereby saving the service sector employers thousands of dollars in lost production, cost of training and duplication of labor.

2.     Workers Compensation Fraud – The old “Monday morning slip and fall” is more than a myth and very costly. According to **reliable industry studies, the average work comp claim is in excess of $40,000. By offering a basic health insurance plan that includes in its benefit design, a non-occupational accident benefit of between $2,500 and $10,000 per claim, a great percentage of these fraudulent claims would be eliminated or significantly mitigated by removing the financial incentives to bring these injuries into the workplace.

**Naumann, Michael (2015, Oct 30). Voluntary A&D Insurance May Reduce Workers’ Compensation Claims. Property Casualty 360

3.     Surplus Claims Funds – The best incentive-based plans like the Pan American PanaBridge product utilize a partially self-funded approach to providing the ACA compliance vehicle known a MEC (Minimum Essential Coverage) This self-insurance component works in tandem with a fully insured set of indemnity benefits to deliver a single priced hybrid benefit package that complies with the ACA employer mandate, but also provides limited hospitalization, in or outpatient surgical, prescription drug and advanced diagnostic benefits that supplement the self-funded preventive services offered through the MEC. What is less appreciated is the value of the surplus claims account (unused dollars funded into the self-funded MEC claims account). Typically, as much as 5% to 10% of the combined contribution of around $100 per employee per month is returned to the employer after incurred but not reported claims (IBNR) are cleared. This surplus can be used to reduce the contribution required in subsequent years, or even to offset any shared responsibility taxes that might be assessed.

By encouraging employers to offer and fully pay for these MEC Plus incentive-based plans, engineer them to increase in value along with length of employment, strongly promote the accident benefits and fully utilize the claims surplus funds, we believe the cost of benefits can be reduced to a nearly net-zero!

For more information on how to evaluate and design these solutions for your clients, please go to or call us directly at 619-301-7460.

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