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Small Business Employee Benefits and HR Blog

Want the Best Employee Benefits? Customize Them with Premium Reimbursement

As a small business owner, you greatly value your employees. That’s because you know them individually. Your company may only have 15 employees, but your employees are diverse; a handful of employees over the age of 50, some that are just starting families, and others that are young adults fresh out of college. You want to offer them the best employee benefits you can, but their needs are all different.Creating the best employee benefits

When each employee has different healthcare needs, offering one-size-fits-all health benefits will not meet your recruiting and retention goals. So, what options do you have?

Instead of offering a traditional one-size-fits-all group health insurance plan you can adopt a premium reimbursement plan and offer the best employee benefits, fully customized to employees’ unique needs.

How to Customize Health Benefits with Premium Reimbursement

With a premium reimbursement approach, you choose exactly how much you would like to contribute towards your employees’ healthcare. Employees purchase their own individual health insurance plan - with their own money - through the Health Insurance Marketplace in your state, or through a broker or online website. Employees are then reimbursed for their premium, up to the amount of their premium reimbursement allowance.

With premium reimbursement, employees select the health plan that best meets their health and financial needs, essentially creating a fully customized benefit with the dollars you provide them.

Additionally, the contribution you offer can be varied by classes of employees. This is allowed as long as the differences are based on bona-fide job criteria such as position, location, number of hours worked weekly, etc.

For example, consider a start up technology company in California who struggled to hire and keep senior programmers in a very tight labor market. Instead of offering the same health plan to all employees, the company created separate classes for senior programmers and junior programmers, giving senior programmers $350 more per month in their premium reimbursement allowance. This large increase helps the company reduce attrition among their senior programmers and recruit needed staff. Plus, it creates a visible incentive for junior programmers to stay and grow with the company.

The Best Employee Benefits, and the Biggest Bang for Your Buck

Using a customized approach puts your limited resources to the most strategic use, and ultimately creates the largest return on investment for your benefit dollars.

To summarize, you can create the best employee benefits and get the most bang for your buck by:

  • Allowing employees to select and purchase the individual health insurance plan of their choice

  • Adopting a premium reimbursement plan to reimburse employees for their premium, or a portion of their premium

  • Customizing the premium reimbursement plan to offer different benefits to different employees, based on your recruiting and retention goals

What questions do you have about creating the best employee benefits through premium reimbursement and customization? Leave a comment below!

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