Introduction
In the face of rising healthcare costs and evolving employee needs, forward-thinking companies are looking beyond traditional major medical coverage to provide comprehensive health benefits. This strategic shift towards supplementary healthcare is not just about offering more benefits; it’s about creating a holistic approach to employee health that can lead to better outcomes, increased productivity, and potential cost savings in the long run.
The Changing Landscape of Employee Benefits
The healthcare benefits landscape has undergone significant changes in recent years.
Rising Major Medical Premiums: According to the Kaiser Family Foundation, the average annual premium for employer-sponsored health insurance in 2021 was $7,739 for single coverage and $22,221 for family coverage, marking a 4% increase from the previous year. This trend of rising costs shows no signs of slowing down.
Limited Focus on Prevention: Traditional major medical plans often focus on treating illnesses rather than preventing them. This reactive approach can lead to higher long-term costs and poorer health outcomes.
Underutilized Tax Incentives: Many employees and employers are not fully leveraging available tax incentives, such as those provided by Section 125 of the Internal Revenue Code. This oversight can result in missed opportunities for financial savings.
Changing Employee Expectations: Today’s workforce increasingly values comprehensive health benefits that go beyond just medical coverage. Employees are looking for programs that support overall wellness and work-life balance.
Introducing Flex Health
Flex Health offers a unique solution to these challenges, providing a supplementary healthcare program that works alongside existing benefits:
Complementary Benefits: Flex Health does not replace or compete with major medical and dental/vision plans. Instead, it works in tandem with existing Section 125 plans like FSAs, HSAs, and accident/life/disability policies by supplementing coverage with screenings, health tracking, and virtual consultations. This approach ensures that employees receive comprehensive coverage without interference.
Focus on Preventative Care: At its core, Flex Health is a Section 125 program centered on preventative healthcare. By partnering with a fully funded and insured hospital indemnity carrier, Flex Health has obtained approval from the Department of Insurance to offer this innovative program.
The Benefits Package
Flex Health’s comprehensive benefit package includes:
Hospital Indemnity Policy: This insurance policy provides employees with up to $1,200 in payable benefits each month in the event of a hospitalization, ambulance, or emergency room instance.
Preventative Healthcare:
- 24/7 Telemedicine Access
- Mental Health Support
- Biometric and DNA Screenings
- Nutrition Counseling
- Health Risk Assessments
- Smoking Cessation Programs
- Chronic Disease Management
- Prescription Drug Benefits
These services are designed to help employees maintain good health and catch potential issues early, potentially reducing the need for more expensive treatments down the line.
Leveraging Section 125 Cafeteria Plans
One of the key advantages of the Flex Health program is the fact that it leverages Section 125.
Pre-Tax Contributions: Section 125 allows employees to pay for certain medical benefits and expenses on a pre-tax basis, effectively reducing their taxable income. This can result in significant savings for employees.
High Premiums: Under the Flex Health program, employees pay a high pre-tax premium each month. However, they also receive a claim payment back into their paycheck each month for approximately 84% of their premiums. This unique structure maximizes the tax advantages while providing valuable benefits.
Reduced Payroll Taxes: As a result of participating in the Flex Health program, employees’ taxable income decreases. This reduction not only lowers their W-2 tax withholding but also saves the employer on their 7.65% employer-matched FICA contributions.
The Financial Impact
An employee with a monthly salary of $5,000 enrolls in the Flex Health program with a monthly premium of $1,200:
- The employee’s taxable income is reduced to $3,800 per month (before other deductions).
- The employee saves on federal, social security, Medicare, and potentially state/city taxes.
- The employer saves on their share of FICA taxes.
- The employee receives a $1,000 indemnity payment back into their paycheck from the carrier. This payment is typically below the “excess benefit” threshold and excluded from taxable income.
- The employee’s tax savings often exceed the remaining cost of the program.
Advantages for Employees
Implementing a program like Flex Health offers several strategic advantages for employers.
Enhanced Benefits Package: In a competitive job market, offering comprehensive health benefits can be a key differentiator in attracting and retaining top talent.
Potential Cost Savings: By focusing on preventative care, employers may see a reduction in overall healthcare costs over time as employees maintain better health. Some clients even choose to reconcile their major medical premiums by removing what is already covered by Flex Health.
Increased Productivity: Healthier employees tend to be more productive and take fewer sick days, potentially leading to improved company performance.
Tax Incentives: The structure of the Flex Health program allows employers to realize significant tax savings through reduced FICA contributions.
Simplified Administration: Despite offering additional benefits, the Flex Health program is designed to integrate seamlessly with existing payroll and benefits systems, minimizing the lift on HR.
The Bottom Line
As healthcare costs continue to rise and employee expectations evolve, companies must look beyond traditional major medical coverage to remain competitive. Programs like Flex Health offer a strategic solution, providing comprehensive supplementary healthcare benefits while capitalizing on available tax incentives.
By leveraging Section 125 and focusing on preventative care, Flex Health creates a win-win situation. Employees gain access to valuable health services and potential tax savings, while employers can offer an enhanced benefits package, potentially reduce long-term healthcare costs, and realize significant tax savings.
In the ever-changing landscape of employee benefits, innovative solutions like Flex Health represent the future of corporate healthcare strategies. By investing in supplementary healthcare, companies can demonstrate a commitment to employee well-being, potentially improve health outcomes, and position themselves for long-term success in an increasingly health-conscious world.
