05/12/2024 9:02 AM

Baen Scriptions

The Health Maniacs

Can Your Employees Truly Afford Their Health Insurance?

Benefits brokers who know how to close deals are smart enough to know they cannot offer employers healthcare benefits that exceed the budget. Their clients are companies with a full basket of expenses to worry about. They need to be incredibly careful about how much they pay for benefits. But what about employees? Is any thought given to how affordable health benefits are for them?

If you are an employer, ask yourself if your employees can truly afford their health insurance? It is not a matter of whether you can withhold from their paychecks to cover their portion of the premium payments. It is whether you are leaving them enough money to live on afterward.

Not Cheap for a Long Time

Group health insurance is certainly not cheap. It hasn’t been cheap for a long time. Since the introduction of health maintenance organizations (HMOs) in the late 1970s, health insurance premiums have been steadily rising. Most years, they rise higher than the rate of inflation.

Families and people who purchase their insurance on the individual market suffer the most from high prices. Here is a sampling of average monthly premiums in 2023 for various family plans:

  • Couples – $954
  • Couples with one child – $1,230
  • Couples with two kids – $1,506
  • Couples with three kids – $1,782.

Couples without children are spending upwards of $12,000 annually for health insurance premiums. That’s not counting deductibles, co-pays, and non-covered services. Throw in two kids and you’re looking at approximately $18,000.

The Basics Aren’t Cheap, Either

We all know how expensive health insurance is. It is not a big secret. But runaway inflation over the last several years has done a real number on household budgets. Even the basics aren’t cheap anymore.

There has been an unwritten rule for decades that a family should not spend more than 10% of its monthly income to cover housing. In recent years though, that number has been ticking up. Some experts are now saying 30%. So let’s do some simple math.

Let us say you have a family with a total household income of $100K. Housing consumes 30%, or $33K. The family consists of a couple with one child paying more than $14,000 annually for health insurance.

We’ll use round numbers and say the family is left with $57K to pay for everything else, including federal and state income taxes – which typically consume about 30%. Take out the taxes and the family are left with $22K to cover all their needs outside of housing and healthcare.

Something Has to Give

A typical family of three with a household income under six figures struggles in the U.S. these days. Not only is it unimaginable, but it is also completely unnecessary. We have the means to do better. It is just that we have a system designed to work against us. At some point, something must give.

As far as health benefits are concerned, employers can help their workers by offering a self-funded plan with minimal essential coverage. StarMed Benefits, a Las Vegas company that provides third-party health plan benefits administration, says that self-funded plans are measurably cheaper.

If a self-funded plan can provide the coverage employees need while leaving more money in their weekly paychecks, the possibility is worth looking into. If not, employers need to look at other avenues. Because as things currently stand, the ability to withhold from employee paychecks to pay health insurance premiums doesn’t mean those employees can truly afford to pay for their health insurance. Some of them might even be on the brink of financial ruin.

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