Our New Series: Employee Benefits Decoded
Most of our readers still in the wealth accumulation phase of their careers are taking advantage of employer-sponsored employee benefits. The world of employee benefits is becoming increasingly complicated. Multiple options, rising employee contributions, shrinking provider networks based on quality outcomes, penalties for going to a retail pharmacy for maintenance medications…if these trends aren’t affecting you yet then they probably will be.
People with employer provided benefits may be thinking they won’t be affected by the recent election should think again. Our President Elect and Congress have made campaign promises to unravel as much as possible of the Affordable Care Act (ACA). Your employee benefits are provided by the same companies that are now well entrenched in the ACA exchanges. These exchanges are the centerpiece of the ACA. Changes to the ACA will result in changes to the entire industry. If the past is any indicator of the future, it won’t result in things getting simpler or cheaper! The information I provide can help you navigate your future choices for benefits, no matter what the future holds.
Why Listen to Me?
I’ve spent 20 years in the employee benefits consulting industry and have seen a lot of trends come and go during that time. In my role, I negotiate renewals and options on behalf of my clients, recommend employee premiums, solve coverage issues, and create and present open enrollment meetings to explain my clients’ particular benefits and rates to their employees.
I do this every day for my career and yet I’m still confused sometimes when trying to weed through my own family’s decisions at open enrollment time. I understand that it can be a terribly confusing situation and you’re relying on varying amounts of information.
What to Expect in this Employee Benefits Series
In this series, I’ll take notable portions of your benefits and decode the jargon to make it easy to understand. With this information you’ll be able to make sense of the benefit materials you receive from your employer. The end result will hopefully be that you make the best of your employee benefits and save money!
For our first installment, let’s cover a fairly straightforward issue, tobacco use penalties and how they can affect your medical insurance.
Tobacco Use Penalties
Many of us have seen life insurance rates based on Tobacco User/Non-Tobacco User status for years. Not all life insurance policies are underwritten that way, but it’s fairly common.
We are now seeing employers base the amount of employee contributions to the medical plan on Tobacco User/Non-Tobacco User status. It can be a little upsetting to employees, especially in industries where a significant percentage of workers are tobacco users.
Why It Is Happening
The reason employers are doing this should not be a surprise to you. The research is clear that tobacco use raises the medical costs of employees on an exponential level over the course of the employee’s life. Those costs have to be absorbed by the medical plan and are then shared between the employer and the employee. Clearly, employers are making tobacco use more expensive to the using employee to curtail costs. They are additionally trying to incentivize the employee to quit tobacco.
Finger Pointing is Typical
The first year of these tobacco use penalties for the medical plan inevitably leads tobacco users to start finger pointing. And who is the target? Usually other employees they think are making unhealthy lifestyle choices. Top of the list is overweight co-workers. They reason if they’re going to be penalized for using tobacco then why aren’t the overweight people also getting penalized?
Yes, there are other lifestyle decisions such as being overweight/not getting enough exercise that are also on the radar. But, these are a tougher thing for the employer to go after for a variety of reasons. Being overweight can be partially or wholly attributable to an underlying medical issue. Causes include depression, back issues, orthopedic problems, or other medical conditions that are far harder to address.
Employers are implementing wellness plans that attempt to address those issues as well but it’s a longer process and I’ll discuss that in a different article. Tobacco use is a fairly cut and dried lifestyle decision that, in general, isn’t typically tied to many other issues.
Tobacco Use Surcharges Aren’t All You Have to Worry About
Most employers are setting monthly or per paycheck surcharges for Tobacco Users which will be paid as long as you can’t certify that you’re a non-Tobacco user. The majority are doing this on the honor system. This usually involves having all employees sign an affidavit each year at open enrollment time. The more tough-minded employers are actually requiring nicotine blood tests.
Employers in some states (Ohio included) are now allowed to use tobacco status as a reason to not hire someone. That’s right, not only could your medical insurance rates be higher for using tobacco, but you could also be denied employment. It’s obviously a very tough stance for employers to take. These companies say they are doing it to keep the costs of their medical insurance plan for their employees as low as possible. Given that employee benefits is usually the second largest budget item for any large employer, it’s a valid concern to want to protect what they’re spending their money on.
Quit Tobacco and Save Money
Due to the ACA you may have a wide variety of free or low cost tobacco cessation products available through your medical plan. Options include nicotine gum, lozenges, patches, and even prescription drugs like Chantix. Many local hospitals offer free or very low cost tobacco cessation programs, and there are a host of other online and local resources as well.
If you’re serious about saving money towards your financial independence and retirement, quitting tobacco is the thing to do. You’ll be able to save the cost of tobacco right away and that amounts to potentially hundreds of dollars a month. Then there is avoiding the extra cost of the surcharge you’d pay towards your medical insurance. Those two things add up to several hundred dollars a month that could be working for you instead of going up in smoke.
I would strongly suggest you take advantage of the resources available to you to quit. It will not only provide you with more savable cash, but it will make you healthier and more likely to be around much longer to enjoy it!
Next in our series is an overview of the types of medical plans frequently offered by employers. (Note this information also applies to those of you buying your medical insurance individually through an exchange or broker).
Please let me know what topics you would like to see in this series. I am happy to add your suggestions to my list!
Jenny is the Queen of Employee Benefits and I cannot add anything to what she already shared. But I can clue you in on a way to stay on her good side! If you don’t want to see her clench her jaw, don’t confuse ‘cessation’ with ‘sensation’. (She’s also a Grammar Queen). I love you, honey!
Posted by Jenny