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Flexible Benefit Plans Give Employees More Options

One way you can give your staff more choice in the employee benefits they receive is to offer them a cafeteria plan, which allows them to put together a benefits package that works best for them.

Employers fund these flexible benefit plans with funds that are deducted from their employees’ salaries on a pre-tax basis. Since the salary reductions are not received by the employee, they are not considered wages for income tax purposes.

Cafeteria plans are particularly good for participants who have regular expenses related to medical issues and childcare.

The worker can choose from a menu of options into which they want to funnel the funds, and how they want those funds allocated. Options can include:

  • Health insurance,
  • Voluntary benefits premiums (like vision and dental),
  • Life insurance,
  • 401(k), and
  • Flexible spending account.

Besides the fact that your employees use money that hasn’t been taxed to pay for these benefits, the payroll deductions for them also reduce their taxable income while raising take-home pay.

A cafeteria plan is especially attractive because it lets them choose which benefits they want. This is great since one size does not fit all in the world of employee benefits.

Set-up and tax implications

Cafeteria plans are also called Section 125 plans because they were created by Section 125 of the IRS Code.

When a plan is created, the benefits are available to employees, their spouses, and their dependents. Depending on the circumstances and details of the plan, Section 125 benefits may also extend to former employees, but the plan cannot exist primarily for them.

Section 125 plans offer a number of tax-saving benefits for employers. For each participant in the plan, employers save on the Federal Insurance Contributions Act (FICA) tax, the Federal Unemployment Tax Act (FUTA) tax, the State Unemployment Tax Act (SUTA) tax, and workers’ compensation insurance premiums.

Combined with the other tax savings, a Section 125 plan usually funds itself because the cost to open the plan is low.

Also, it’s estimated that participating employees can save 20% to 40% of every dollar put into the plan. The employee chooses how much they want to put into the plan each year and this is deducted from their paycheck automatically for each payroll period.

Remember: Flexible benefit plans are not without their drawbacks. But if you want to attract and retain key personnel with competitive benefit packages while keeping your own costs low, they can be an attractive alternative to standard benefit plans.

Call us for more information on how you can set up a flexible benefit plan for your staff.

There are several types of flexible benefit plans, including cafeteria plans and flexible spending accounts.

Flexible spending accounts

An FSA lets your employees pay for medical-related expenses and dependent care that may not be covered by their health plan. They can later use these funds to pay for an array of expenses such as:

  • Out-of-pocket medical costs,
  • Acupuncture, chiropractic services and the like,
  • Medical equipment,
  • Day-care provider fees,
  • Elder care.

Also, employers can allow the employee to carry over a portion of the funds in an FSA to the first few months of the next year. The maximum permitted carryover amount is $550.


Digital Health Benefit Tools Can Help Your Employees Save Money, Stay Healthy

It’s no secret that most employees do not fully understand all of their health insurance benefits, which can lead to worse health outcomes and them spending more money than they need to for some medical procedures.

A recent survey of 226 executives by Harvard Business Review Analytic Services concluded that employees and employers could enjoy better outcomes if it were easier for employees to find, understand and use the benefits available to them.

One of the biggest roadblocks to making that possible, the survey indicates, is the difficulty workers have in navigating their benefits programs.

Fortunately, a number of health technology companies have come to the fore to help employees see better health outcomes, shop around for medical services, educate themselves about their health and disease management, and choose the health plan that is best for them.

These tools can help employees make informed health care decisions, while their employer can save money. The tools can help them choose proper care that meets their needs and is within their budget. Some of the new tools on the market include:

Quizzify — This tool gamifies learning about health care through humorous, trivia-style quizzes, reviewed by doctors at Harvard Medical School. The system can help employees build knowledge about diagnostics, medical procedures, dental care, how to shop around for health services, and more.

The creators of Quizzify said they want to address the problem of Americans making far too few primary care visits, while they also receive too much health care that is unnecessary. All of that costs employees because:

  • Missing regular doctor’s appointments and preventative services can result in health emergencies later, and
  • Overtreatment and unnecessary treatments can lead to worse health outcomes and higher out-of-pocket costs.

Employees who use the tool rave about it, particularly how it helps them negotiate medical costs and provides them with advance knowledge that can help them save thousands of dollars in health care expenses.

Jellyvision’s Alex platform — This tool gives employees advice about accessing their health benefits and using their health savings accounts (HSAs) more effectively. It’s mainly geared towards large companies, but there are similar products being developed for the small and mid-sized employer market.

Some of Alex’s features include:

  • Personalized guidance during enrollment and ongoing engagement during the year, as it sends out reminders and tips about an employee’s health insurance and health maintenance.
  • A focus on reducing the cost to employers of employee confusion.
  • A built-in HSA that actively promotes investing in the account throughout the year.
  • Chronic disease management tools.
  • Benefits videos.
  • Engagement tools that help employers and staff improve their health literacy and save money.

League— This online tool and app is designed to help your employees choose which health plans are best for them, and to identify health risks and help them access preventative care. The platform also includes a mobile-first communications channel for employers.

League provides employees with a personalized health profile, as well as a digital wallet that holds employee assistance program information and other programs that you may be providing, such as HSAs.

The main features for employees include:

  • Digital wallet — This also holds HSA funds and allows your employees to pay for health and wellness services, review benefit coverage, and keep tabs on their HSA balance.
  • Marketplace — League can help your staff book appointments with over 1,000 local, vetted health professionals and access discounts on services and products.
  • Health concierge — They can talk to a registered nurse directly for instant advice.
  • Claims reimbursement — They can submit claims digitally to get reimbursed for services.
  • Tailored content — They can receive AI and data-driven recommendations and nudges regarding healthy behavior or recommendations for health screenings or procedures.

The takeaway

Online or digital tools alone won’t work for every worker. Some need a more human-centered approach to help them understand their benefits, how to get the most out of them and improve their health.

But tools like the above can go a long way towards educating them about their health and health benefits.

While many of your workers will easily adopt electronic price transparency tools, others will need time to get used to them. It’s important that you provide training for any benefit tool you roll out, and also leave the door open for employees to access one-on-one advice so they can make the right choices.


Your Staff Are Susceptible to Medical Identity Theft

Medical-related identity theft accounted for 43% of all identity theft in the United States in 2020, according to the Identity Theft Resource Center.

And the majority of documents criminals steal are the same ones your employees receive from their group health insurers. If an employee becomes a victim of medical identity theft it can take them years to undo the damage, particularly if their identity is stolen in the process.

That’s why it’s important for any employer with a group health plan to warn its staff about the importance of safeguarding their medical and health insurance information, including plan information and health insurance cards.

Medical identity theft is when someone uses another person’s personal information — like their name, Social Security number, health insurance account number or Medicare number — to see a doctor, get prescription drugs, buy medical devices, submit claims with the victim’s insurance provider, or get other medical care.

If the thief’s health information is mixed with the victim’s, it could affect the medical care the victim is able to receive, or the health insurance benefits they are able to use. It could also hurt their credit.

People often learn they are victims of such fraud when they get a medical bill or a notice from their health insurance company about what will be covered for a procedure they never went in for.

Alert your staff

The most important advice for your staff is that they should take good care of their health insurance card. This includes:

  • Making sure they get their health insurance card back every time they use it.
  • Cutting up their old card whenever they receive a new one for a new policy year or other reason. The new one should be put in their wallet.
  • Reporting a loss immediately to their insurance company if the card is lost or stolen. They can issue a new one and void the old one, so that nobody can use it for doctor’s visits or to purchase medication.

Your employees should also keep their medical records, health insurance records and any other documents with medical information in a safe place. This includes:

  • Health insurance enrollment forms
  • Prescriptions
  • Prescription bottles
  • Doctor and medical provider billing statements
  • Explanation of Benefits statements from their health carrier.

Any of the above documents should be shredded when it’s time to replace or discard them.

Also, since thieves will sometimes steal mail from mailboxes, you can recommend that your workers sign up for paperless communications from their insurer.

How to identify fraud

Safeguarding the above information can go a long way towards avoiding medical identity theft, but it can still happen. Your employees should know the warning signs. The Federal Trade Commission recommends being on the lookout for the following:

  • You get a bill from your doctor for services you didn’t get.
  • You notice errors in your Explanation of Benefits statement, like services you didn’t get or prescription medications you don’t take.
  • You get a call from a debt collector about a medical debt you don’t owe.
  • You review your credit report and see medical debt-collection notices that you don’t recognize.
  • You get a notice from your health insurance company saying you reached your benefit limit.
  • You are denied insurance coverage because your medical records show a pre-existing condition you don’t have.

Action steps

If you think someone is using your personal information to see a doctor, get prescription drugs, buy medical devices, submit claims with your insurance provider, or get other medical care, taking the steps below will help you limit the damage:

  • Thoroughly review your medical records.
  • Contact your insurance company and each provider and pharmacy where a thief may have used your information, and ask for copies of these medical records. You may have to submit records requests and pay fees to get copies.
  • Review the records and look for errors, like visits or services you didn’t receive.
  • Report the errors to each provider, pharmacy and your insurance carrier, with backup documentation that shows the incorrect information and an explanation of why it’s wrong — and ask that they remove the visits and services from your records.

Under federal law, health insurers have 30 days to respond to your requests.

For good measure, your employees should also review their credit reports.