There are many options to choose from when it comes to offering a health benefit to your employees. While some options are immediately recognizable, such as traditional group health insurance, others are more difficult to understand.
You may have seen the term “ancillary benefits” when searching for health insurance coverage. But what are ancillary benefits, and why should you offer them to your employees?
This article will define ancillary benefits and explain how your employees can benefit from them.
What are ancillary benefits?
Ancillary benefits are secondary benefits not included in most traditional health insurance plans. These are often used to supplement group health insurance coverage for medical expenses incurred during hospital stays. These benefits use pre-tax dollars and can also be used for preventative care.
Traditional group health insurance often doesn’t cover the entire cost of a hospital bill. Ancillary benefits help cover these extra costs for ambulance costs and supplies like bandages.
Dental, vision, and life insurance coverage are also considered ancillary insurance since you offer them in addition to health insurance.
These secondary benefits can be paired with a group health insurance policy to enhance your employee’s medical coverage.
Employers generally only offer ancillary benefits as voluntary or employer-contributory. With an employer-contributory system, you pay 50 to 100% of your employees’ ancillary benefits, while you pay 0 to 49% under a voluntary system.
Contributing less to an ancillary benefit is certainly an option, but many employers find contributing to ancillary benefits encourages more employees to use the benefit.
Why offer ancillary benefits to your employees?
Offering ancillary benefits to your employees can be beneficial in attracting and retaining top talent. Your organization will be more competitive in the job market by offering these additional benefits.
Your organization will also benefit from increased employee productivity, as ancillary benefits allow employees to access the care they may not otherwise have, such as dental or vision care. Since ancillary benefits include preventative care, your employees can stay healthy, making them less likely to take sick days.
Other potential benefits of ancillary benefits include:
- Providing peace of mind to employees
- Reducing the cost of your group health insurance policy if you switch to a high deductible health plan (HDHP)
- Offering preventative care can reduce the number of sick days employees take
- Supporting your employees’ financial wellness
How to offer ancillary benefits
If your organization is looking to offer ancillary benefits to supplement a group health insurance plan, there are many options to choose from.
Some of the most popular ancillary benefits are:
- Life insurance
- Vision insurance
- Dental insurance
- Disability insurance
- Health savings account (HSA)
- Flexible spending account (FSA)
- Health reimbursement arrangement (HRA)
- Employee stipends
We’ll look at a few of these benefits in more detail below.
Life insurance is a popular ancillary benefit. A group life insurance policy helps your employees provide for their families in the event of their death. Life insurance can also help pay for funeral expenses. If your life insurance policy allows accelerated benefits riders, your employees can even use their funds while living if diagnosed with a terminal illness.
Health reimbursement arrangement (HRA)
An HRA is a health benefit that allows you to reimburse your employees for qualifying medical expenses. HRAs are tax-free for both the employer and the employee, making them a great health benefit option.
While HRAs are sometime used in place of traditional group health insurance plans because they allow employees to purchase their own health insurance policies, they can also pair with group plans to be used as ancillary benefits.
A group coverage HRA (GCHRA), also known as an integrated HRA, is specifically designed to be offered alongside a group health plan. With a GCHRA, you can set a custom monthly allowance for reimbursement toward out-of-pocket medical expenses that your insurance plan doesn’t cover.
The most common reimbursements approved under a GCHRA are medical office visits, prescriptions, and chiropractic care. All submitted expenses must be substantiated with an invoice or receipt, although some reimbursements require a doctor’s note or prescription information to comply with federal regulations.
Setting up and managing a GCHRA only takes a few minutes every month, making it an easy ancillary benefit to offer to your employees covered by your group health policy.
Another way to add ancillary benefits to your existing group health insurance plan is to offer employee stipends. Sometimes called fringe benefits, employee stipends are a fixed sum of money provided to your employees to help them pay for health, wellness, and remote work expenses.
They can be offered through expense reimbursements, much like an HRA. However, employee stipends are taxable for both the employer and the employee.
Employee stipends are highly flexible because they can be offered to any of your employees regardless of whether or not they have health insurance, no matter where they live, and no matter their employment status.
You can offer your employees a health stipend to supplement your group health insurance plan. This allows your employees to use their monthly allowance on medical expenses not covered by insurance, such as out-of-pocket expenses or office visits.
You can further supplement your employee benefits with a wellness stipend. You can reimburse your employees for their wellness expenses with a wellness stipend, such as gym memberships. Allowing your employees to improve their overall well-being helps them stay healthy and more productive at work.
Employees stipends are a simple and effective way to supplement your current employee benefits.
Offering ancillary benefits can help your organization attract new talent and retain employees by supplementing your existing employee benefits package. This can include a dental plan or vision insurance, life insurance, or personalized benefits such as HRAs or employee stipends.
If you’re looking to add flexible ancillary benefits to your benefits package, PeopleKeep can help! Our HRA and employee stipend administration software makes setting up your ancillary benefits easy.