Broker Check

"Rainy-day" Savings vs. Group Medical Insurance

| October 21, 2022


       Over these past years, I’ve had employers tell me that offering group medical insurance to their employees is too expensive. Most of the time that statement is followed by, I’d rather just give the money to my employees. That could be a great option, so long as you have the right plan in place. Without knowing the laws, you may open yourself up to tax implications. I’m not a CPA and I can’t give tax advice but working with an accountant or CPA is very important to understand these implications. They can also help you to see if a stipend, Health Reimbursement Arrangement (HRA), or other option fits your company.  

       The issue lies in that employers normally don’t have the time to set up these arrangements or they get them set up and can’t get the employee to enroll in an individual health plan. In my opinion, when you compare a group plan vs. an individual plan the premium is usually much lower with a group plan.   

       There is one thing a “rainy-day" savings account typically can’t help with, and that’s a $1,000,000 medical bill. You may be saying “that’ll never happen”, but it can happen in an instant. I got into the insurance business because I spent about a year in the hospital, and I didn’t have medical insurance. I had surgeries done in “back rooms”; I was told they were going to send me home from the hospital, because they needed a bed occupant that could pay for it. Luckily, my mom was there to fight for me. I remember an instance when they told me to calm down, that I was having a panic attack, but I was actually missing a pint of blood and my lungs were collapsing.   

       Having a “rainy-day" savings account may have somewhat helped offset some costs, but with a medical plan has a maximum out of pocket. A maximum out of pocket is the maximum amount of money that each participant will have to pay for their medical expenses, aside from monthly premiums. Once this amount is reached, the employee is only liable to pay their monthly premium. Back then, I had no maximum limit to my medical expenses while I was in the hospital.   

       Offering medical benefits can not only help your employees financial well-being, but it can also help you as the employer. Not only financially, but with overall morale at your workplace, as well as helping to keep down the turnover rate.