Group Ancillary Insurance

Why offer ancillary benefits?

Employees still need oral and vision care.  Offering a health plan is not enough to keep employees healthy.

Research continues to show that dental and vision plans can be effective preventive healthcare tools that may lower medical claims costs in the long run.  Early symptoms of high blood pressure, diabetes and other diseases can be detected in an eye exam before showing up in a physical. 

Health insurance also does not provide income protection in the event of a death.  Life insurance can help employees protect their loved ones by providing a monetary benefit to cover the cost of a funeral or a debt.

Group life insurance has a high-perceived value as well!  According to the U.S. Bureau of Labor Statistics, as of 2010, 96 percent of employees who had access to group life insurance took advatange of it.

Ancillary benefits have the advantage of being affordable, too.

Purchasing these benefits at a group level is more affordable than if purchased on an individual basis.  Cost is limited for three reasons:

As group insurance products, the risk is spread through a large population, which keeps premiums reasonably priced.

If your business takes advantage of Section 125 of the IRS code, premiums are paid with pre-tax dollars.

The cost can either be completely covered by the employer or shared with the employees by arranging an employer-employee split.

How does ancillary employee benefits work?

There are two ways ancillary benefits can be funded: voluntary or employer-contributory.  On employer-contributory ancillary benefits, the employer usually pays 50 to 100 percent of the premiums.  On voluntary plans, the employer may contribute 0 to 49 percent of the premiums.

Through payroll deduction, employees pay whatever portion of the premiums that the employer does not cover.  Then when an employee uses their benefits, a claim is submitted and benefits are paid directly to the network-contracted provider or to the member (if a network provider is not used).  For life insurance claims, the beneficiary is paid directly (in the event of a death).

There are many reasons why an employer may contribute more or less of the cost of an ancillary benefit. Companies may only cover the full cost of their health plan, and let employees choose to purchase a voluntary dental or vision plan.  Others may find that offering employer-contributory anicllary plans encourages more employees to enroll.

The key is to know what works best for your business.  Discussing your company and employees’ needs with your insurance agent can help determine the best combination of these benefits.

Whichever you decide, offering ancillary benefits can be a win-win proposition:

Benefits to Employers

  • Lower employer FICA contributions if your business takes advantage of Section 125 so that employees can use pre-tax dollars for these benefits
  • The value of ancillary benefits is high among employees and would enhance the employer’s reputation among employees.
  • Offering ancillary benefits make your business more competitive in the employment marketplace.  With them, you can compete with other employers who may already provide these value-added benefits.
  • Employers do not pay for voluntary ancillary benefits or can share the cost with employees to keep costs down while  pleasing employees.

Benefits to Employees

  • They can use pre-tax dollars to pay for ancillary benefits, thus lowering their taxable income.
  • The cost is affordable.  Risk is spread amont a large group of people to keep the premiums reasonable.
  • Ancillary products respond to workers’ needs to access important benefits, such as dental insurance, vision insurance and group term life insurance.
  • With ancillary dental and vision benefits, workers can get preventative care, not just care when a problem develops.
  • They can enjoy the peace of mind and security that comes with ancillary benefits and group insurance.