Minnesota law requires employers to pay a minimum of 50% of each qualified employee health insurance premium. In many instances however, employers may pay 50% of the employee cost and an additional 25 to 50% of the dependent cost as well. Although very generous, there are two inherent flaws within this arrangement; employee equality and adverse selection.
Equality among employees is very important. It is only a matter of time before a single employee realizes that their employer is offering enhanced benefits to an employee of the same status simply because they have a family.
Adverse selection generally states that unhealthy employees without other options will gravitate towards your plan regardless of price, and those employees without an immediate need for insurance will seek out alternative options, based usually on price. Did you know that 20% of subscribers result in 80% of the claims? That means that those employees who need insurance, are the ones driving your up your costs, while those employees that are choosing to go without insurance, or went somewhere less expensive, are the ones that would have kept your costs balanced.
So what is the most ideal way to fund employer contribution? Fund as close to 100% of the employee premium as possible, making sure that all additional contribution is being paid to the employees first and then dependents. This will keep all eligible employees on the plan, which ultimately helps in balancing your claims. It encourages employees to find alternative options for dependents, while still providing options within your benefit programs for those same dependents. It keeps better equality within your company and it allows for balanced growth in the future, as these issues become more evident the larger a company becomes.
