You are a small employer who has believed in providing top-notch benefits to you
ID: 2655076 • Letter: Y
Question
You are a small employer who has believed in providing top-notch benefits to your 250 employees for many years. For the last several years you have provided a wide choice of health benefits through a cafeteria plan and made very generous contributions to their cost. Employees could choose between a comprehensive major medical plan and two different PPOs and were required to pay for only 10% of the cost. Everyone received vision coverage at no cost. All employees had their choice between two different dental plans with the employer paying 75% of the premium. Employees could elect to receive long-term care insurance for themselves and their parents and pay for it through a salary reduction plan with pre-tax dollars. As a result of these wonderful benefits, you don’t experience much turnover amongst your employees. However, your costs have been increasing lately at an alarming rate. You realize you must change the way you provide benefits.
You are considering either a core-plus plan or a modular plan. The core-plus plan would provide everyone with health insurance through a point of service plan (POS) at no cost to the employee. Additionally, employees would be given a certain number of benefit credits to apply toward the purchase of vision, dental and/or long-term care insurance that would fund approximately 20% of the costs of the optional benefits. They could contribute toward the remaining cost on a pre-tax basis. The modular plan would offer employees a choice between three plans: Plan L would completely cover the cost for employees to enroll in an HMO for both expenses and dental insurance. Plan M would provide coverage in a POS plan for medical and a modest dental insurance policy, requiring employees to cover 20% of the cost. Plan H would give employees health, dental and vision insurance through a PPO with employees paying 40% of the cost. Again, any costs borne by employees would be set up on a pre-tax basis.
Discuss the following:
a. How will the new plans allow you to control your benefit costs compared with the current arrangement? Be specific.
b. How do you think your employees will react to switching away from their previous cafeteria plan? Explain. (be very spicific)
c. Do you think the core-plus plan or modular plan will be better? Justify your selection with specific reasons.
Explanation / Answer
Answer:-a:
Current plans are asking for just 10% from the employee and employer is bearing the rest costs. But in the new plan employee contribution can be upto 40 % and hence it would save around 20% of the Costs to the employer.
b.
Employees will react negatively on the plan change as it would result in lesser benefits for them. Reducing the Employers contribution / bearing shall increase the cost in the hand of employees and hence they shall reach negative on this change.
c. Modular plan will be the better option as it would save more to the employer. And also the employees shall have option to choose one of the plans so they will also be satisfied.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.