//this is the mailchimp popup form //ShareThis code for sharing images
Home / Blog / Employee Benefits Insurance: Everything You Need to Know

Employee Benefits Insurance: Everything You Need to Know

Why employee benefits insurance matters & how to choose, implement, and manage it for your business

Frank Mengert
CEO of ebm
Contributing Experts
No items found.
An HR professional standing in front of a whiteboard that has the word insurance written on it.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Contributing Experts

Table of Contents

Share this article

Subscribe to weekly updates

Join 20,000 HR Tech Nerds who get our weekly insights
Thanks for signing up, we send our newsletter every Wednesday at 10 AM ET!
Oops! Something went wrong while submitting the form.
15 Best Employee Rewards Programs (2024)

As an employer, you need to ensure your employees feel valued and secure. One of the most effective ways to do this is to provide an extensive insurance benefits package via benefits administration software that caters to your organization's and your workforce's needs.

Insurance benefits provide your workforce with security and peace of mind knowing they won't need to worry about the unexpected. But to get the right benefits package in place, you must first understand the different types of employee benefits insurance available, what they provide, and how they can be efficiently implemented into your organization.

In This Article

Understanding Employee Benefits Insurance

Employee benefits insurance comprises the insurance policies and services that employers offer to complement their employees' regular remuneration and other benefits (such as paid time off, retirement benefits, etc).

By definition, employee benefits insurance involves the company paying, or partially paying, for one or more insurance policies in which the employee is the beneficiary. The type of insurance coverage would depend on the policy and may be affected by the employee’s co-payment or tenure.

The insurance policies a company may take out would depend on the coverage they want to provide employees and the type of work in question. For example, an employee who takes on some risk of injury (such as a production line technician or electrical worker), may warrant liability insurance as a fiduciary responsibility. A worker who only needs to be in a relatively low-risk environment, such as an office, may not.

The chief aim of insurance benefits is to increase employees' contentment in their roles. Providing safeguards to distress such as unemployment insurance, health insurance, dental insurance and coverage for short-term disability provides that peace of mind. This, in turn, improves the overall welfare of your workforce in and out of the office and statistics show that it helps with retention.

While employers may customize their benefits program to fit their requirements, providing some benefits insurance is essential for remaining competitive in the employment industry. In the current labor market, for starters, offering health benefits, such as a health insurance plan, paid sick leave, and medical insurance is an expectation many professionals hold dear. Foregoing these benefits may mean your company loses out on top talent.

The hands of an HR professional who is assisting an employee with the paperwork and administration of signing up for insurance benefits.

Why Employee Benefits Insurance Matters

We’ve established that employee benefits, including insurance benefits, play a pivotal role in retaining employees and attracting new talent. To be more specific, here are some reasons why it is essential for companies to offer a comprehensive employee benefits package:

Attracting Talent

Offering desirable benefits shows potential employees that the company prioritizes their well-being and wants to ensure their success in the long run.

Be sure to talk about your benefits package and employee perks in recruitment marketing channels, such as on your career site and job listings. It can be a significant factor for job seekers when deciding between multiple job offers, giving your business an advantage over other companies.

Employee Retention

A well-designed benefits package can heighten employee satisfaction and establish loyalty to your organization. These factors contribute to increased workforce morale and lower rates of employee turnover. Implementing a benefits program can therefore also help your business reduce the expenses of filling vacant positions and training new hires.

It is tempting to incentivize retention by offering better workplace and insurance benefits to employees with longer tenure— so the longer they stay the less likely it will be that they leave. However, bear in mind that new employees will compare your entry-level benefits package to what they receive from a current employer as well as your competitors. It is therefore also an excellent strategy to provide a desirable benefits offering to all full-time employees from day one.

Increased Productivity

When employees are satisfied with their overall compensation, they are more likely to have higher job satisfaction and be motivated to perform better for the organization they work with.

In addition, an employee who has access to health benefits such as sick leave and medical insurance will be more likely to address health concerns. When an employee does not regularly check for underlying health issues or leaves a health concern untreated (often due to the financial implications of out-of-pocket treatment or missing work), their condition can lead to presenteeism. This term refers to employees who come to work even when they are ill for fear of reprimand or losing income if they don’t.

You may wonder what the harm is of an employee coming to work even when they’re not feeling great. As it turns out, a paid sick day is by far the smaller loss compared to employees who show up but struggle to complete day-to-day tasks

Harvard Business Review estimates that presenteeism costs the U.S. economy upwards of $150 billion per year in lost productivity, surpassing annual absenteeism costs. A significant portion of these costs results from workers struggling with depression and anxiety, two of the most common mental health conditions in the United States.

There is a significant financial incentive for companies to have healthy employees. Providing insurance benefits that offer mental health coverage and medical assistance means they can get the help they need to feel good instead of facing work on a day when they really should be focused on getting better. Only 61% of employees have access to mental health care as part of their benefits package, so there is room for improvement here.

Fewer Absences

In the same vein, access to decent medical care also means employees who do get sick and take time off will have an optimal rate of recovery. By implementing comprehensive health and wellness programs for employees, companies can cultivate a healthier workforce, resulting in lower absenteeism rates.

Medical insurance programs grant employees access to a range of essential resources, including preventive care, early detection of health problems, and tools to manage chronic conditions, decreasing the chances of long-term absences.

Tax Advantages

Employers can deduct taxes on certain benefits provided to employees, including health insurance premiums and retirement plan contributions. This tax deduction helps employees and employers by lowering their taxable income.

Be mindful that offering health insurance that exceeds federal minimum standards, means your employees lose eligibility for any plans they bought off the Affordable Care Act (ACA) marketplace, and any tax benefit they receive from these plans.

Sheets of medication lying next to a stack of 20-dollar bills to depict a healthcare policy that covers employees’ medical expenses.

Common Types of Employee Benefits Insurance

When choosing an employee benefits package, several types of insurance policies must be considered. Here are some of the most popular types of employee benefits insurance that employers typically offer:

1. Health Insurance

For many people, health insurance that provides medical attention, hospitalization, drug prescriptions, and preventive healthcare coverage is the most indispensable type of employee benefit.

Employers typically present various options, such as HMOs (Health Maintenance Organizations) or PPOs (Preferred Provider Organizations), with varying benefits, coverage, and premiums. This variety allows employees to select the most appropriate plan for their needs.

2. Life Insurance

Life insurance offers crucial financial protection for the designated dependents of an employee in case of their untimely demise. Employers frequently provide group-term life insurance policies that can be more economical than personalized ones.

The coverage amount can be a factor in the employee's yearly earnings, and additional coverage options at discounted rates could be available through some employers.

3. Disability Insurance

Disability insurance is a provision that provides financial support in the event that they become temporarily or permanently disabled due to an illness or injury. Employers will typically contribute a portion of the employee's regular earnings according to a specific plan and for a set time period.

Akin to this is workers’ compensation which pays out to the employee if they get injured at work. This essential benefit allows workers to maintain their financial stability during periods of inability to work, by covering their necessary expenses.

4. Retirement Plans

Retirement plans offer a reliable financial basis for employees in their later years. Among the most favored choices for employers is the 401(k) plan, which permits employees to deposit a fraction of their pre-tax income. Employers may then provide a matching percentage of these contributions.

Other choices include the 403(b) plan for nonprofit organizations, the Simplified Employee Pension (SEP) plan, and the Savings Incentive Match Plan for Employees (SIMPLE). These plans provide a firm groundwork for employees to save for the future, ensuring their financial security.

Any retirement benefits your company offers must adhere to the Employee Retirement Income Security Act of 1974 (ERISA). This federal law sets minimum standards for voluntarily established retirement and health plans in private industry to ensure employees are protected from inadequate coverage.

5. Vision and Dental Insurance Plans

Supplemental insurance policies for vision and dental care alleviate the expense of related medical services. Vision plans usually cover vision procedures such as eye exams, glasses, or contact lenses.

Dental plans care for routine cleaning, fillings, and complex treatments such as root canals or orthodontic procedures. Employers may present the plans distinctly or incorporate them as a part of their complete health insurance package.

6. Wellness Programs

Wellness programs are a great way to motivate and guide employees toward a healthier lifestyle. These programs include various resources and benefits, such as on-site health screenings, stress management workshops, nutrition counseling, support for those wanting to quit smoking, and access to fitness centers.

While these wellness programs are not insurance policies themselves, they may benefit your benefits insurance. A company-wide focus on well-being and preventative care would, for example, positively affect the cost of your health insurance premiums.

A group of employees smiling when they are informed of the insurance benefits offered by their employer.

How to Choose the Right Employee Benefits Insurance for Your Company

A comprehensive understanding of your workforce's distinct requirements and inclinations is imperative before browsing the employee benefits insurance market. Surveying is recommended to obtain feedback on the benefits that hold the highest significance for your employees.

These may include health insurance, dental and vision coverage, life insurance, disability insurance, and retirement plans.

In addition, it is crucial to consider your workforce's demographics when designing a benefits package. For instance, younger employees might value extended maternity leave and parental leave. Employees with young children may prefer flexible work arrangements and life insurance to tie their families over in the event of their death. Older employees, on the other hand, might prioritize retirement savings options.

Understanding your employees' necessities will enable you to develop a benefits plan, including the relevant insurance policies, that meets their needs.

Consider Your Budget

While it's essential to offer competitive employee benefits, you also need to ensure that the cost of the benefits package aligns with your company's budget. Start by reviewing your current financial situation and determining how much you can allocate toward employee benefits.

Remember that offering a comprehensive benefits package can save your company money in the long run by reducing turnover and improving employee satisfaction.

As we’ve seen, assisting employees with health benefits also supports productivity and attendance, which positively influences your bottom line.

Work with a Benefits Consultant

Finding the right employee benefits insurance for your organization can be intricate. As such, working with a qualified professional to navigate all the options is always beneficial. A benefits consultant can evaluate your employees' requirements, calculate your budget and pinpoint the most suitable insurance providers and plans for your business.

When seeking a consultant, prioritize those with industry-specific experience and up-to-date knowledge of regulations and trends. Additionally, opt for individuals with a well-established network of insurance providers and the ability to secure competitive rates on your behalf through skilled negotiation.

Evaluate Different Insurance Providers and Plans

Research various providers and compare their offerings, reputation, customer service, and pricing.

You should carefully review the details of each plan, paying close attention to coverage levels, deductibles, co-payments, and any exclusions or limitations. Remember that the cheapest plan may not always be the best option for the business, as it might not provide the coverage your employees actually need.

Finally, consider the provider's network of healthcare providers and facilities. A plan with a limited network may be less expensive, but it could also restrict your employees' access to quality care.

An HR professional explaining insurance benefits to employees in a meeting room and going over the policy’s paperwork with them.

Implementing and Managing Employee Benefits Insurance

Once you’ve settled on one or more insurance benefits providers, consider how you’ll implement and communicate these benefits to employees. Bear in mind that employee benefits are not a set-and-forget task. Operational responsibility to manage employee benefits from both the company’s side and the subscriptions of individual new employees must fall on a particular person or department within your organization. Luckily, there are excellent resources at your disposal.

Technology for Employee Benefits Management

Offering even some of the benefits listed above creates a considerable amount of administrative work. You can save your human resources department a lot of compliance and workload stress by investing in a good employee benefits administration software or a human resources information system (HRIS) with a robust benefits module.

Either of these platforms will allow employees to sign up for the benefits they prefer, and manage their own subscriptions via an employee self-service portal linked to the company’s payroll administration. When implementing employee benefits insurance, use open enrollment to automate the administrative processes.

The most popular benefits administration technology solutions include:

  • Benefits administration software: This software streamlines the entire benefits management process, from plan setup and enrollment to ongoing administration and compliance.
  • Employee self-service portals: These allow employees to view and manage their benefits information online, anytime and anywhere.
  • Mobile app solutions: Mobile apps give employees easy access to their benefits information on the go, simplifying enrollment and making it easier to use their benefits plans.

Communicate Benefits to Employees

It is imperative to establish effective employee benefits communication to relay the value of their packages to employees effectively. This entails disseminating pertinent information about the offering, its mechanisms, and the correct ways to use them.

Employers should utilize various channels, including email, company intranets, and printed materials, to properly reach and inform all employees. Periodically remind employees that they have access to things like healthcare benefits, dental insurance, etc. Encouraging employees to make use of these benefits means they, and by extension, your company will get the most value out of them.

Regularly Review and Update the Benefits Package

It is essential to periodically review and update your employee benefits insurance package to ensure that it remains competitive and meets the evolving needs of your workforce. This process involves conducting market research to stay informed about industry trends and benchmarking your benefits package against your competitors.

Keep an eye out for non-traditional insurance benefits such as pet insurance and healthcare benefits that cover fertility and hormonal health. By prioritizing emerging benefit offerings, your organization can stay ahead of the game and continue to attract high-caliber talent. Comparing your offerings with those of similar organizations within your industry can provide valuable insights into areas where your package may lack or excel.

Ensure Legal Compliance and Adequate Record Keeping

Employers must follow specific laws and regulations regarding employee benefits insurance whether handling the process internally or through benefits administration outsourcing. To comply with the law, employers must ensure that they provide adequate records of their offerings and that all relevant information is current.

Some critical areas to be aware of include:

  • ERISA regulations: These determine how employers must handle and manage employee benefits plans.
  • Tax laws: Employers must comply with tax laws to ensure they are not overpaying or underpaying taxes related to their employee benefits packages.
  • Record-keeping requirements: Employers must maintain adequate records for all employees, detailing their benefits coverage and contributions.
  • HIPAA regulations: These establish standards for the protection of confidential employee health information.

By following these laws and regulations, employers can ensure that they are correctly administering benefits and upholding employees' rights. Keeping adequate records can also help employers identify areas for improvement and make informed decisions about necessary changes.

Consider Employee Benefits Liability

It can happen that, through omissions from the employee’s side or mismanagement on the part of a company, an employee benefits dispute may arise. Determining the eligibility of a beneficiary and payable damages can incur legal costs and may result in a settlement that the company has to pay out to the employee, depending on the outcome.

Employee benefits liability is an insurance policy that protects employers from lawsuits directly related to their employee benefits programs. Taking out employee benefits liability (as a standalone policy or as part of a general liability policy) is advisable, especially for a small business that could be financially ruined by a large claim.

Keeping Your Organization Ahead of the Curve

Employee benefits insurance is a critical component of any effective compensation package. By following best practices, relying on automation and technology solutions, and staying informed about changing laws and regulations, employers can ensure that their benefits program remains current and competitive.

Doing so will help attract and retain top talent while strengthening employee engagement and long-term job satisfaction.

Frank Mengert
CEO of ebm
LinkedIn logoTwitter logo

Frank Mengert continues to find success by spotting opportunities where others see nothing. As the founder and CEO of ebm, a leading provider of employee benefits solutions, Frank has built the business by bridging the gap between insurance and technology-driven solutions for brokers, consultants, carriers, and employers nationwide.

Frank is a Young Entrepreneur Council (YEC) member and holds a position on the Board of Directors for the Cystic Fibrosis Foundation.

Also featured in: EBN, TrainingIndustry.com, DeliveringHappiness.com, YEC, Spiceworks

Related posts

Join 35,000 HR Tech Nerds who get our weekly insights

More posts
Read HR Tech Reviews