Direct to employee insurance??? Employer has had enough!

lendaddy · 05:28 AM

As a business owner I have had it with insurance. Not just the money but the red-tape and bull****.

For Instance:

I have an employee that needed bypass surgery, everything went fine and he was back to work in a week ($40-$50k later of course).

Anyway the insurance company comes in and does an audit on him and finds that he averaged only 36 hours a week so they declined all his claims and dumped him! They say this is justified because we specified a "full-time" employee is 40 hours (duh) and hence he is not eligible for insurance. In other words a total technicality as no one gets 40 hours EVERY week.

I am tired of getting in the middle of this crap! I raised hell and it'll get squared away, but not without wasting a ton of my time and with my ass at legal risk.

So.....(finally) I just want to dump the insurance all together, give my guys a few hundred more a month in pay, and then arrange for insurance reps to come in and sell direct to them. I am OUT, that way no responsibilities, no headaches. The guys can decide on their own what they want and don't want, etc...

I only have 18 employees right now, so can I do this? Anyone have experience here?

Rot 911 · 12-30-2005, 05:35 AM

Even better set up a Medical Savings Plan so the money put in there from their salary is tax exempt. Then they can use that money to pay for their own insurance.

Joeaksa · 12-30-2005, 05:47 AM

Give them the money in a way its tax free and then set them up with blue cross/blue shield or the like. That gets them a better group rate and it gets out of your hair.

JoeA

lendaddy · 12-30-2005, 05:59 AM

Quote:

Originally posted by Joeaksa
Give them the money in a way its tax free and then set them up with blue cross/blue shield or the like. That gets them a better group rate and it gets out of your hair.

JoeA

So BC/BS will come in and deal direct? Will this get rid off all the employer BS? I basically want them to be able to buy (or not buy) whatever they want. I would bring in reps just for courtesy, they can go wherever they want is the idea. If they get fired or leave they can take their coverage with them as it's a contract between them and XYZ Insurance Co. and not contingent on employment or lack there of. Only ability to pay.

Can you guys feel me? Seems like everyone wins here.

legion · 12-30-2005, 06:02 AM

Hmmm...

Our standard work week here is 38:45 hours a week. I guess none of us are "full time".

If you only have 18 guys, it might be nice to sit down with the group and explain the BS you are dealing with. Maybe you can come to some kind of consensus on what to do. The problem with giving them more money to cover health costs is that individual insurance rates (I think this is true) are much higher than group rates, so even if you give them the money that you would otherwise pay in premiums, they still come out behind. Plus, the kind of coverage they would be able to purchase (at a higher cost) would also be inferior.

lendaddy · 12-30-2005, 06:08 AM

Quote:

Originally posted by legion
Hmmm...

Our standard work week here is 38:45 hours a week. I guess none of us are "full time".

If you only have 18 guys, it might be nice to sit down with the group and explain the BS you are dealing with. Maybe you can come to some kind of consensus on what to do. The problem with giving them more money to cover health costs is that individual insurance rates (I think this is true) are much higher than group rates, so even if you give them the money that you would otherwise pay in premiums, they still come out behind. Plus, the kind of coverage they would be able to purchase (at a higher cost) would also be inferior.

Is it inferior oris that an assumption? We have a PPO now, so it would seem that comparable coverage is everywhere (as far as actual care).

lendaddy · 12-30-2005, 06:10 AM

Quote:

Originally posted by legion
Hmmm...

Our standard work week here is 38:45 hours a week. I guess none of us are "full time".

Check your insurance contract, the administrator can usually specify anything over 32 hours. My rep says this is a common mistake and he apologized for not catching it for me

Jims5543 · 12-30-2005, 06:26 AM

Quote:

Originally posted by lendaddy
Anyway the insurance company comes in and does an audit on him and finds that he averaged only 36 hours a week so they declined all his claims and dumped him! They say this is justified because we specified a "full-time" employee is 40 hours (duh) and hence he is not eligible for insurance. In other words a total technicality as no one gets 40 hours EVERY week.

I am tired of getting in the middle of this crap! I raised hell and it'll get squared away, but not without wasting a ton of my time and with my ass at legal risk.

So.....(finally) I just want to dump the insurance all together, give my guys a few hundred more a month in pay, and then arrange for insurance reps to come in and sell direct to them. I am OUT, that way no responsibilities, no headaches. The guys can decide on their own what they want and don't want, etc...

I only have 18 employees right now, so can I do this? Anyone have experience here?

I did exactly what you described. I dumped my health insurance and gave everyone a $2 an hour raise to cover their expenses for coverage.

Guess how many went out and got insurance??

ZERO!

Joeaksa · 12-30-2005, 06:29 AM

Len,

We did this at my old place. Each employee was given $250 a month for their health insurance. Almost everyone went with BC/BS and they would do a single person, group of 5 or more or larger.

I would dump your current insurer on principal. If you call the person a full time employee, then thats BS for them to come in and say he is not just to squirm out of paying the bill.

JoeA

legion · 12-30-2005, 06:32 AM

Quote:

Originally posted by lendaddy
Is it inferior oris that an assumption? We have a PPO now, so it would seem that comparable coverage is everywhere (as far as actual care).

That is a generalization.

It might not be true in your case. I just wanted to bring it to your attention so that you didn't unintentionally leave your employees worse off.

lendaddy · 12-30-2005, 07:05 AM

Quote:

Originally posted by Jim Cesiro
I did exactly what you described. I dumped my health insurance and gave everyone a $2 an hour raise to cover their expenses for coverage.

Guess how many went out and got insurance??

ZERO!

How many guys do you have? In general are you glad you did it? Were you able to find good coverage for yourself and your family? Are the employees happier now or before (I bet now).

Drago · Drago's Garage

Quote:

Originally posted by legion
The problem with giving them more money to cover health costs is that individual insurance rates (I think this is true) are much higher than group rates, so even if you give them the money that you would otherwise pay in premiums, they still come out behind. Plus, the kind of coverage they would be able to purchase (at a higher cost) would also be inferior.

Not necessarily true. I, as a contractor, buy my own insurance. When I started at the company I'm now working for they offered up a group plan that was very similar to my individual plan.

My individual insurance was less expensive.

Why? My age (35 at the time) was less than the average age of the group.

So, if your crew are mostly younger guys individual policies may be the way to go. Of course, the younger guys are more apt to take the money and run.

North Coast Cab · North Coast Cab's Garage

Consider joining a larger group through some sort of organization where they do the majority of the negotiating for you. Typically you can get a sort of cafeteria plan where the individuals choose there own benefits. You give them X amount of money and they spend it as they see fit and can contribute above that whatever they want. It gives people with different needs an opportnity to select what's best for them. I'd be affraid of dropping the company plan because it is a major issue for all employees and you may hurt your existing or potential employees. It send the message "you're on your own."

John

kycarguy 935 · 12-30-2005, 01:55 PM

Just heard on the news Sam's Club is selling insurance now. Maybe that is an option.

Moses · 12-30-2005, 02:01 PM

Don't give up so easily. Odds are he is covered anyway. In Califonia, if you paid the premiums in good faith, then the employee is COVERED, period.

I would bet it's the same in Michigan.

If they give you trouble, just tell them you are placing a call to one of your old friends at the state insurance commissioners office.

Dixie · Dixie's Garage

Quote:

$2 an hour raise to cover their expenses for coverage.
Guess how many went out and got insurance??
ZERO

Hmmm....
In no way am I saying you've done anything wrong, but let's look at this from Joe-hourly's vantage.

Basic work-year is just under 2,000 hours. So, $2 * 2000 hrs = $4,000 a year raise to cover insurance.

Now, the last time I was self-employed, and boought my own coverage for a family of four, I spent about $900 a month

$900 * 12 mths = $10,800

So Joe has $4,000 a year for insurance, but still need to come up with over $6,000 more to buy a policy on their own.

On the other hand, Joe could keep the money, and buy a new truck. illness stricks, He'll just go to the E.R. And if the bill is too big, he'll simply not pay it. And if they that causes financial difficulties, there is always Medicaide....

Jamie79SC · 12-30-2005, 02:21 PM

Let me second North Cab's advice. In Washington State, there is an association called Washington Employers that provides all kinds of HR services for small businesses. Dues are very reasonable and there are several insurance options that THEY MANAGE for us. It's a good deal all around.

There must be a similar organization in MI.

Big Ed · 12-30-2005, 02:34 PM

What Rob said. I just got done paying for my own (wife got job with bennies, i'm self employed). Was paying $900 a month for really mediocre coverage. I wouldn't go without, but I can see how some would decide that given a $200-400 a month allowance.

genrex · 12-30-2005, 07:15 PM

I just want to say "Thanks!" for helping your employee.

This is the website Jamie mentioned..
http://www.washingtonemployerstrust.com/

campbellcj · 07:41 PM

I'm basically in the same predicament. 6 covered employees including myself, but we have also always insured dependants of eligible employees (although that policy is now 'grandfathered' for new hires.) This is costing us something around $6K/mo now with a good Blue Cross PPO, and is of course weighted very heavily towards the older (but not Medicare-eligible) and/or child-rearing employees.

I have no problem offering 100% coverage to employees, as employee health and satisfaction is important to me; however, is there a generally-accepted coverage rate (percentage) for dependents these days? Is it now basically the 'norm' for the employee to pay out of pocket for their family's coverage? If so, does this typically lead to an 'unspoken' increase in wage/salary?

If I do need/want to put a cap on employee coverage, is there some typical monthly amount or % of comp that new hires would be shooting for and accept w/o too much grief?

I'm finally funded to hire 3-5 more people in the next couple months so any advice would be appreciated.