How Much Do Employee Benefits Cost?

Dear Rachel: I run a successful business with twenty employees and would like to start offering benefits, but want to get an idea of the cost first. I've looked online but can't find anything. Could you please give me some insight on what I'm getting myself into?

The answer is: it depends... but that's not very helpful! So, I've compiled a list of benefits, design options, and ballpark costs to get you started.

Demographics:

Age - Is your average employee age 35? Great news! Your Life Insurance and Long Term Disability premiums will reflect this. Conversely, if your employees are all in their 60's it can really affect costs.

Gender - Did you know that statistically, women are more likely than men to make a Long Term Disability claim? This can be reflected in your disability premiums when your employee base trends towards one gender or the other.

Volume - Single or family? Depending on whether your employees have dependents, rates for Health, Dental and Vision can vary. Expect to pay approximately double the Single rate for Family coverage.

Life and Dependent Life Insurance, Accidental Death & Dismemberment (AD&D), Short and Long Term Disability and Critical Illness coverage amounts all vary depending on plan design. They can be indexed to earnings or offered as a flat amount; your premium cost is based on the total volume of coverage.

Sample monthly rates:

- Life Insurance can range from $0.10 to $1.00 per $1,000 of coverage; Dependent Life Insurance can range from $1.00 to $4.00 per employee with dependents.

- AD&D from $0.03 to $0.25 per $1,000.

- Short and Long Term Disability can range vastly depending on the plan design; expect to pay between $0.20 and $1.00 per $10 of weekly earnings for Short Term, and between $0.20 and $3.00 per $100 of monthly earnings for Long Term Disability.

- Critical Illness can range from $0.10 to $4.00 per $1,000 of coverage.

Industry - Are your employees working in a professional office at a desk? Or are they involved in manual tasks such as lifting inventory and using heavy machinery? Depending on what industry your business is in, your employees are more likely to make certain types of claims.

Turnover - If you've had a benefits plan for a while, have you marketed your plan more than every three years? Does your employee base have a lot of "churn"? This can add up to extra risk for the insurer that you may not be a loyal customer, or that there will be additional administration required. Insurance carriers love stable employee bases because it helps them to predict claiming patterns more accurately when setting rates.

Benefits:

Extended Health Coverage (EHC): What's driving the cost of EHC is prescription drug coverage; drugs tend to comprise the majority of claims your employees will make. Typical coverage is 80% coinsurance (or 20% out of pocket to the employee), and a marquee plan will offer 100%.

Other "rate affecters": Paramedical practitioner coverage for services such as physio, chiro, and massage. Typical coverage ranges from $200 to $500 per practitioner per year. Hospital room upgrades can include a semi-private or private room.

What You'll Pay: Rates for Health coverage generally range from $30 Single to $150 per employee with dependents per month.

Dental: Dental plans are usually divided into three increasing levels of coverage, Basic, Major and Orthodontic Services. Basic covers regular cleanings and check-ups. The best plans cover recall exams every six months, but this can range to 9 or 12 months. Major coverage is for more in depth work such as crowns and bridges. Orthodontics can be limited to dependent children only or be inclusive of adults.

Other "rate affecters": Each of these coverage levels comes with its own coinsurance level and possible deductibles. Cream of the crop plans offer 100% Basic, 80% Major and 50% Orthodontics, but for some small businesses offering only 80% Basic can be a welcome perk. Coverage maximums also affect the rate; offerings range from $500 to $3,000 for each of Basic and Major or a combination of the two. Ortho usually comes with a lifetime maximum of $1,000 but this can range from $500 to $5,000.

What You'll Pay: Rates for Dental coverage generally range from $30 Single to $150 per Employee with Dependents per month.

Health Spending Accounts / Cost Plus: There are ways to offer flexible personalized coverage without insurance. These arrangements allow small business owners to set annual limits, and employees to spend coverage credits at their own discretion.

Again, it needs to be said that these are ballpark figures and your rates will be specific to your plan and the employees it will cover. If you want to get started with a quote or for more information, please feel free to contact me at rachel@truebenefits.ca or 604.872.2866. Or, you can request a quote here.