Flex benefit programs allow the employee varying degrees of input into the benefits selection process. Allowing employees to choose their benefit options has been available for many years, but only available to larger employers. This was due to the fact that it was expensive to administer from both the insurance company and employer perspectives; this is no longer the case. Advances in technology have removed these barriers with software that allows us to deliver these styles of programs in a cost-effective manner to organizations of 5 employees or greater. This new-found flexibility also allows employers to manage the programs more effectively while at the same time bringing more value to employees.
The limits of creativity are endless with regards to plan design but in reality, there are three basic concepts, starting with the least complex and ending with the most sophisticated:
- Modular Flex
- Core Plus Options
This style of program can be described as a stepped approach allowing the employee to choose either a bronze, silver or gold level of coverage based on how much the employee wishes to contribute. The employer contribution is pegged and is the same for each employee. Employees can change their option during the re-enrollment period which is typically every 2 years. There are rules surrounding movement from level to level which are strategically put in place to avoid anti-selection. Modular flex is by far the easiest to communicate, implement and administer. It is available for groups of 35 employees or greater.
Core plus options
This approach to benefits allows for more flexibility than modular flex. The fundamental difference between the two is that all employees have the same basic benefits (core) but the combinations of the options available to choose from are much larger. The approach to funding is the same as modular flex but the distribution of funds is much more detailed as each employee is allocated a number of flex credits annually. After making benefit selections, if employees have additional flex credits remaining, they can be transferred to a health care spending account. For employees whose benefit selections cost more than the available flex credits, the difference can be covered through payroll deductions. There is increased administration required for this approach as employee communication is integral to a successful program. That said, the amount of administration required by HR has improved in recent years, due to system improvements from benefit providers.
The cafeteria style approach is by far the most flexible with the employee being able to select benefits by line item. The employee is given a sum of flex credits and a very detailed list of benefits from which to choose. This makes each individual plan unique unto itself and in theory, should accommodate every individual's needs. This is by far and away the most expensive delivery method from an administration perspective with the HR commitment becoming the linchpin to its success with increased soft costs. This approach to benefits is reserved for larger employers.
The most important take away from this article is "choice". Employers of all sizes now have more benefit options and flexibility to better meet the needs of their diverse workforce. In Sun Life's 2016 Generations and Group Benefits Survey 40% of baby boomers wanted greater flexibility compared to 49% of Millennials. Contact BCI to explore a flex benefit program for your organization.
Employers of all sizes now have more benefit options and flexibility to better meet the needs of their diverse workforce. In Sun Life's 2016 Generations and Group Benefits Survey 40% of baby boomers wanted greater flexibility compared to 49% of Millennials.