How Voluntary Benefits Can Help Meet PPACA Rules, Workers’ Needs

The PPACA is on every employer’s radar these days, with the “pay or play” rules going into effect in early 2014. Rather than pay a penalty, employers may offer only bare-bones major medical at their expense, and focus on voluntary benefits chosen by employees to make up the rest of their plan options.

This shift toward the employee paying for more of their major medical premiums and all of their voluntary benefits has been happening over the past few years, before the PPACA passed, and it has only increased since the Supreme Court’s rule upholding the legislation. If voluntary benefits are going to be a substantial part of your benefits package in 2014, it’s time to start evaluating your plan now and thinking about how you’ll communicate the changes to your employees.

If your office decides to save money by lowering their health benefits or increasing deductibles, voluntary benefits can help workers manage that transition.

One voluntary benefit to consider is gap coverage. Depending on the amount of coverage, it can pay any costs that go toward a deductible or coinsurance. Individual plans are typically less than $30 a month. With the PPACA eliminating most pre-existing condition limits, gap coverage can help right away. Let’s say your employee breaks his leg and requires a $20,000 surgery to put pins in his bones and then physical therapy. His plan’s deductible is $5,000 and then 80/20 coinsurance, so that employee will be out thousands of dollars.. An investment of $30 a month in gap insurance now seems like a very good bet.

Another voluntary benefit that is being taken more seriously in light of the PPACA is short-term disability insurance. Sometimes workers will forego short-term disability and spend it only on long-term disability and long term care, assuming their savings will cover any short-term issues. The above employee with the broken leg — let’s say he makes $5,000 a month and has $10,000 in savings. He may have felt like anything that would keep him out of work for two to eight weeks wouldn’t bankrupt him because it’s not as serious as say, cancer, and he does have insurance and savings. Well, if he misses eight weeks of work with no short-term disability coverage, he’s out $10,000 in salary. His savings are gone. If he doesn’t have gap coverage, he’s got no savings and now owes thousands to the hospital.

In one skiing accident, he went from being above the curve with a 2 month emergency fund to being thousands in debt. If he had short-term disability to insure up to 60% of his income, plus the gap coverage to pay the medical bills, he’d only be missing $4,000 in salary. He can dip into his savings for that or make temporary changes in his lifestyle to cover the shortfall.

Gap coverage and short term disability will go a long way towards improving your voluntary benefits package and insuring that the PPACA doesn’t unexpectedly leave your employees with huge medical bills. These two elements will cover almost all scenarios, but still other voluntary benefits will help more. Cancer, critical illness, transplant and hospital policies can all help as well. Also, when negotiating rates for dental, vision, life insurance or other voluntary benefits not specifically changed by the PPACA, shop around. Try and get the lowest possible rates for your employees so they have more money to spend on gap coverage, short-term disability, etc.

It will be your job as the benefits administrator to communicate all of this to your employees and help them make the best choices in light of any changes made to your plans by the PPACA. Employees will definitely have questions and want to protect themselves from any unexpected large expenses. Explain that while these voluntary benefits may just look like more money coming out of their check, they really do add value and can keep them healthy, wealthy and working.

Article written by Michael Motyka