Employers’ Guide to Offering Benefits in Washington State
The Long Term Benefit of Benefits
One of the largest dilemmas facing many business owners in Washington State today is: How can you offer benefits to your employees. Is it even possible to offer a rich benefits package that attracts and retains great employees, all the while maintaining a profitable business?
In this guide, we will look at the various types of benefits you can provide to your employees and give some tips on how to offer them cost effectively. Then we will review mandatory and optional benefits that can be offered to create a value based benefits package.
In the end, we’ll make the case that you don’t have to choose between growing your business and providing benefits to your employees. A long-term view will ensure steady growth for your company and a team of enthusiastic employees.
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2021 Washington State Insurance Laws Updates
Enrolling & Renewing Changes in 2021
- Out of pocket cap. WA House Bill 2662 – Effective 1/1/2021 for new plans or as they renew, requires that health plans cap enrollees’ out-of-pocket expenses at $100 for a 30-day supply of insulin.
- Substance abuse coverage. WA House Bill 2642 – Effective 1/1/2021 for new plans or as they renew, substance abuse disorder treatment must be covered without prior authorization or utilization review required, for initial days of care. Also, non-network providers will be paid at the in-network level and cannot balance bill patients.
- Telehealth. Telemedicine Payment Parity Effective 1/1/2021, requires insurance carriers to pay the same rate for telehealth as for an in-person visit.
2021 Federal Changes to Group Benefits
Changes to HSA, FSA, and HRA
213(d) Items – Remember, the CARES Act permanently expanded qualified medical expenses under 213(d), which affects HSAs, FSAs, and some HRAs. It added the cost of menstrual care products to the list of 213(d) items and again allows over-the-counter products and medications. This applies to purchases on or after 1/1/2020.
2021 HSA Contribution Limits
- HSA contribution limit (company + employee): $3,600 – $7,200
- HSA catch up contributions (age 55+): $1,000 – $1,000
The IRS adjusted the fee for plan years ending after 9/30/2020 and before 10/1/2021 to $2.66.
Mandatory Benefits in Washington State
Let’s begin by looking at the benefits related to health insurance you must provide your employees by law, starting with health benefits.
Health Insurance Benefits
If you have 50 or more full time equivalent employees, the Affordable Care Act (ACA) requires you to offer either qualified and affordable health benefits,or pay a hefty tax penalty. If you have less than 50 employees there is no requirement to offer health insurance.
In general if you offer health insurance and have 20 or more employees, you must offer termed employees the option to continue their health insurance. Employees would pay the premium to continue the coverage. Typically employees can COBRA their coverage a maximum of 18 months. Dependents can typically continue coverage up to 36 months.
Family and Medical Leave
All employers with 50 or more employees must abide by the federal Family and Medical Leave Act, which requires employers to give employees up to 12 unpaid weeks off to attend to the birth/adoption of a baby or the serious health condition of the employee or an immediate family member. Employers are required to continue an employee’s health insurance during FMLA. Learn more about the FMLA.
Washington state also has the Paid Family Medical Leave program (PFLM). Beginning in 2020, it allows most employees to receive up to 12 weeks of paid leave for bonding with a newborn or adopted child or employee’s serious health condition or health condition of a qualifying family member. At this time there is no requirement for an employer to continue health insurance while on PFML. Learn more
Optional Benefits Employers Can Offer
It might surprise you to learn that businesses in Washington state are not required to provide the following benefits:
If you have less than 50 employees it is optional for you to provide health insurance to your employees.
Employees with individual dental coverage can take advantage of preventive dental checkups. About 50% of US companies choose to offer their employees group dental insurance plans.
Offering employees these benefits, especially if they are at risk of digital eye strain through long hours in front of a computer screen, sends a message that you care about their health and well-being.
Eighty-two percent of companies offer company-paid group life insurance benefits to employees, according to a 2019 report by the Society for Human Resource Management.
Short- and long-term disability insurance plans replace some of the pay workers lose when they cannot work because of an injury or illness that is not related to their job.
Many companies wonder if they should still offer short-term disability now that Washington has the Paid Family Medical Leave (PFML). There are some situations where it makes sense to offer the benefit. What if an employee is sick longer than the 12 weeks or if they are a higher wage earner. PFML would not provide enough benefit to the employee and short-term disability could supplement that gap.
No laws require employers to offer long-term disability coverage, but about half of large and mid-sized employers offer it to their workers. That is because it can replace an employee’s income if they have a long term injury and can no longer work.
In practice, though, most companies offer some or all of these voluntary benefits to stay competitive. The key is tailoring your benefits offerings to the makeup of your employee base. For example, millennials aren’t happy with one-size-fits-all benefit programs. They want options to be able to customize their benefits package and voluntary supplemental offerings. Allow an employee to take the medical plan being offered and then design the rest of their benefits to suit their needs. One employee might want dental and vision where the next may want Life insurance and Long Term Disability.
How Much do Employee Benefits Cost?
Employee benefits can be the second largest expense for a company after payroll. It can also become an administrative burden with payroll deductions and paperwork. However, there are ways to control the costs.
How to Reduce the Cost of Employee Health Insurance
Limited Provider Networks
Many companies offer Health Maintenance Organizations (HMO) or Exclusive Provider Organizations (EPO), networks. These require employees to use certain doctors in the network which helps to control costs.
The higher the deductible the more affordable the plan. These days there are many different kinds of high deductible plans including those that are still usable for your employees with unlimited office visits for a co-pay. According to the Kaiser Family Foundation, the average annual deductible is now at $1,655, double the average of a decade ago.
Tax Advantaged Accounts
Implementation of Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA) allow employers and employees to save additional funds.
Partial or Fully self insured plans allow an employer to potentially save premiums and design the exact plan an employer wants. Learn more about Self Insurance in Washington State.
Washington state employers can implement a waiting period before benefits start from date of hire to 90 days.
The idea of promoting wellness among employees is- a healthier workforce may use fewer health benefits. Most large firms and many small firms have programs that help workers identify health issues and manage chronic conditions. Some Carriers offer discounts to wellness participation in an employer group that is as simple as a health screening for tracking diet and activity over a short period of time.
Choosing Benefits Based on Company Size
Here are some thoughts on choosing benefits based on your company size:
If your company has fewer than 50 employees, you are exempt from the Affordable Care Act and do not have to provide health benefits to your employees. Despite this, about half of employers with fewer than 50 employees provide some health benefits, according to the US Chamber of Commerce.
A small business could mitigate the cost of providing health benefits by only contributing towards the employees premium and not the dependents.
Long Term disability is very expensive when purchased outside of an employer. You may be able to attract a higher caliber employee by offering this coverage.
50 employees is an important benchmark when it comes to providing time off. First off, when a company hits 50 employees they come under the jurisdiction of the federal Family Medical Leave Act, which requires employers to provide up to 12 weeks of unpaid time off for a newborn/adopted child or a serious illness of the employee or family member.
Secondly, when you reach 50 employees, you are required to pay the employer portion of Washington state’s Paid Family and Medical Leave program.
Review your compliance checklists to make sure you are providing all the correct forms.
Consider how you will monitor and submit 1094-c/1095-c filings.
As your company grows, consider revisiting your cost sharing structure and begin to cover a portion of dependent coverage.
When you have more than 100 employees you may have the cash available to offer some of the more “cutting-edge” supplemental benefits such as tuition assistance and fitness reimbursements.
When Should You Start Providing Benefits?
Short answer: As soon as it is financially viable.
Take the long-term view when it comes to the cost of benefits. While going without benefits may boost your bottom line in the short run, a penny-wise philosophy could strangle your business’s chances for long-term prosperity because you can’t retain top employees.
People scrutinize the benefits package being offered with a new job, and, all things being equal, 55% say they will take less money for better benefits. They’ll always go with the company that has better benefits and it’s the company with the best people that wins. Your benefits package makes you the most competitive for the most talented people. It needs to be at least as good as your competitors’ if you want to win the war for talent.
The Key is Having the Right Mindset
Provide the benefits you’re legally required to provide
Once again, if you have 50 or more employees, the Affordable Care Act requires you to provide health benefits to your employees.
Create a strategy on how to start offering benefits
For a smaller company the hardest part is starting. Get the core benefits first and implement at a cost that is sustainable to offer medical to your employees. Then create the voluntary strategy to implement options like dental and vision. Life, Disability, and other options come next. Having a 3 to 5 year goal to a great benefit package is a good timeline to customize the kind of plan you can be proud to offer anyone wanting to work with your organization and sets the standard of expectation to get to work for your organization.
When it comes to the voluntary benefits, offer something close to the industry standard
Look for ways you can provide those benefits cost effectively—but don’t get fixated on the short-term cost. In the end, providing a quality benefits package will ensure the best future for your company because it will help you attract, retain and motivate the best employees.
Look at adding ‘fringe’ benefits that will resonate with your employee base
Be strategic. For example, if you have a lot of younger employees, you may want to offer tuition
How Do You Compare Benefits Brokers?
Providing benefits is only getting more complex. For example, most employees expect their employers to provide high-tech benefits interfaces. Employers need to carefully weigh which broker they choose.
It’s a high-stakes game, as many areas of employee benefits, such as retirement plans, are highly regulated. Compliance is critical.
Can you stay on top of the regulatory environment on your own? Ask brokers how they will keep you compliant over time and how you’ll be notified of regulatory changes.
Even though benefits are becoming more technologically driven, customer service in the form of actual human contact is vital. Make sure the broker doesn’t skimp on the personalized service they’ll provide you. You want a long-lasting quality relationship.
Finally, make sure the broker gives you access to deep data on your benefits program. You’ll need that information to make informed decisions that will help you minimize costs and maximize results. (If your plan is fully insured, you won’t have as much access to data. You’ll only have access to what the insurance company offers.)
Get Expert Advice at No Cost
Here at McGregor Benefits, we are dedicated to providing answers and solutions for employers and individuals for your health insurance plans and human resources needs. McGregor Benefits’ personalized service puts your needs first. We are not tied to insurance company quotas. Our loyalty is to each of our clients, big and small. We are dedicated to listening to what you want to accomplish and our job is to find the pathway to the best options at your lowest costs. We are not here to sell you policies, but to build a long lasting, quality relationship.
This article is for informational purposes only and does not constitute legal advice. Readers should first consult their attorney, accountant or adviser before acting upon any information in this article.
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