As a small business owner or manager, we are challenged every year to select a group health insurance plan for our company. And every year the battle of balancing the cost to the business and affordability to the employee against the best coverage possible becomes more and more difficult because insurance premiums continue to rise at an astronomical rate. Double digit increases are the norm with many in the 20% to 30% range. To compound the problem, deductibles continue to increase as well to as much as $10,000 or more. While this is a problem for all businesses, it hits a small business particularly hard. This is not from just a purely cost perspective but also from the desire to provide a quality health plan for the employees. In our company, most of the employees have several years of service and are essential to the company's ongoing success. Retaining them and giving them a "peace of mind" about their health care is important.
To combat this issue, we implemented a Classic 105 Program to work in concert with our group health plan.
So what is a Classic 105 Program?
- A Classic 105 Program is a uniquely designed plan that will save the employee money on healthcare costs regardless of the plan.
- It is a medical reimbursement account that pays for unreimbursed medical expenses incurred throughout the year.
- It pays 75% of unreimbursed medical expenses, up to a maximum of $12,000 for individuals and $19,200 for families.
- Employers can save an average of $400 per employee per year in matching taxes
But here’s the really good part. Because this particular plan greatly increases tax advantages for both the employee and the company, we were not only able to save the company money but also increased the take home pay of most of the employees, averaging approximately $50.00 per pay period.
To further demonstrate the power of this program, the cost increase of the renewal for our group plan was going to be 8%, not too bad in today’s market. By participating in the Classic 105 Program, we will be able to select another plan with twice the deductible, while keeping all other coverage the same, and reduce the premium by over 3%. So instead of an 8% increase, there will be a 3% cost reduction. While this is good for the company, by having both plans working together, the employee’s out of pocket expenses will be reduced by 50%, which is very good for the employee as well.