This is often the response when I tell clients what it would cost to replace their company group health insurance if they become self-employed or find new employment with a company that does not offer as generous a group health insurance program.
The vast majority of employees do not know the monetary value of their company health insurance benefits. In fact, most are also unfamiliar with what the benefits offer them and their family.
You probably scanned the booklet when you were hired. You then selected some options (if there were multiple benefit levels to choose from) and then filed the booklet away.
Here are some things to consider before you make that job change, or gripe about the minimal raise you got this year….
1. The most valuable part of the plan is the long term disability benefit.
Insurance is really intended to cover the big, uncertain risks in life.
Employees tend to value the smaller, certain costs such as teeth cleaning and vision coverage. Most of us could manage the small stuff if we had to, but a long term disability without income would be a financial disaster.
2. The second most valuable part of the plan is the prescription coverage, if the annual benefit is unlimited.
These days, some of the most effective medications for a severe or chronic illness can cost upwards of $5,000 per month. Because of this, many plans now have annual caps on the amount that can be claimed for drugs. If your plan does not have an annual cap, be thankful.
3. You likely did not have to qualify medically to be eligible.
If the company is large enough, getting on the health plan is as simple as getting through your initial probation period (typically 3 months). You get on the plan irrespective of medications you currently take and your health history. If you tried to buy your own individual coverage, in some cases, existing medications would be excluded, and in cases of poor health history, coverage is often declined outright.
4. In general, group benefits are not portable.
Some plans allow a departing employee to convert the life insurance coverage to individual coverage. This will be at a higher rate that you could get if you applied for new coverage because you don’t have to qualify medically. So if you are healthy, buying your own coverage makes more sense.
Some plans also offer conversion options for medical benefits, also at higher than medically underwritten rates, but if your health is poor, this could be a good option for you.
The most valuable benefit, long term disability is not portable.
5. The cost of group benefits is rising dramatically each year, which is a significant expense for your employer.
Health care cost inflation rates are well above general inflation rates. Cost of benefits can also increase dramatically for a small company with higher than average claims by one or more employees.
So if you are contemplating a change in employment, do your homework on the group benefits you are giving up so that you can negotiate knowledgeably with your new employer. Before you become your own boss, find out what buying your own coverage will cost so that you can factor that into the cost of running a business.
This information is of a general nature and should not be considered professional advice. Its accuracy or completeness is not guaranteed and Queensbury Strategies Inc. assumes no responsibility or liability.