What are Ancillary Products?

What are Ancillary Products?

Employees love dental and vision products, they are the second and third most requested employee benefits. Research continues to show that dental and vision plans can be effective preventive healthcare tools that may lower medical claims costs overall. Early symptoms of high blood pressure, diabetes and other diseases can be detected in an eye exam before showing up in a physical. Life insurance can help employees protect their loved ones by providing a monetary benefit to cover the cost of a funeral or a debt health insurance also does not provide income protection in the event of a death.

Ancillary benefits are affordable, too. Purchasing these benefits at a group level is more affordable than if purchased on an individual basis. Cost is limited for three reasons:

  • As group insurance products, the risk is spread through a large population, which keeps premiums reasonably priced.
  • If your business takes advantage of Section 125 of the IRS code, premiums are paid with pre-tax dollars.
  • The cost can either be completely covered by the employer or shared with the employees by arranging an employer-employee split.

There are two ways ancillary benefits can be funded: voluntary or employer-contributory. On employer-contributory ancillary benefits, the employer usually pays 50 to 100 percent of the premiums. On voluntary plans, the employer may contribute 0 to 49 percent of the premiums.

Through payroll deduction, employees pay whatever portion of the premiums that the employer does not cover. Then when an employee uses their benefits, a claim is submitted and benefits are paid directly to the network-contracted provider or to the member (if a network provider is not used). For life insurance claims, the beneficiary is paid directly (in the event of a death).

There are many reasons why an employer may contribute more or less of the cost of an ancillary benefit. Companies may only cover the full cost of their health plan, and let employees choose to purchase a voluntary dental or vision plan. Others may find that offering employer-contributory ancillary plans encourages more employees to enroll. 

There are several benefits for employers and employees when choosing to add on ancillary benefits.

For employers:

  • Lower employer FICA contributions if your business takes advantage of Section 125 so that employees can use pre-tax dollars for these benefits
  • The value of ancillary benefits is high among employees and would enhance the employer’s reputation among employees.
  • Offering ancillary benefits make your business more competitive in the employment marketplace.  With them, you can compete with other employers who may already provide these value-added benefits.
  • Employers do not pay for voluntary ancillary benefits or can share the cost with employees to keep costs down while pleasing employees.

For employees:

  • They can use pre-tax dollars to pay for ancillary benefits, thus lowering their taxable income.
  • The cost is affordable.  Risk is spread among a large group of people to keep the premiums reasonable.
  • Ancillary products respond to workers’ needs to access important benefits, such as dental insurance, vision insurance and group term life insurance.
  • With ancillary dental and vision benefits, workers can get preventative care, not just care when a problem develops.
  • They can enjoy the peace of mind and security that comes with ancillary benefits and group insurance.

For more information regarding ancillary benefits, please contact us today.

 

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