A few groups I’m working with are struggling with how to handle their employees’ dependents hence the inspiration for this week’s article.

It’s a bit tricky.

On one hand, you want to offer a compelling insurance package that’s competitive to your industry’s norms.

On the other hand, you want to balance:

• Your premium now & in the future
• The amount of claims you’ll get
• YOY sustainability

Is offering dependents coverage a necessity?

Probably not- it may be one of many factors that may sway a decision to join or leave, but it’s not going to be the sole deciding factor.

Bigger things are going to be:

• Compensation
• Culture & how they’re treated
• Their opportunity, career growth, how rewarding it is

Options:

1) Mandatorily Cover All of  Them (MHD Groups)

If your company has 10 employees, you qualify for Medical Health Disregarded – pre-existing conditions are covered & waiting periods are waived. A core stipulation of this:

• Dependents are covered & it’s mandatory to add all of them
• You cannot pick & choose which employees can add their dependents in

Why? To prevent anti-selection. Healthy people who don’t claim much need to balance out unhealthy people, who are only joining to take advantage of having MHD terms..

Think of the classic 80/20 rule: 80% of your claims are coming from 20% of your staff. If only unhealthy dependents are joining, high claims, insurers lose money & these are for-profit private businesses.

2) Only Cover Some of Them

If covering all dependents is too much, which it often is, then you can look at creating different employee categories or tiers and only cover dependents who fit a certain category. For example:

• Category 1: Ownership/C-level Executives & Senior employees – can include dependents
• Category 2: Normal Staff – cannot include dependents

When creating categories, they must be clearly defined & the insurer follows rigid rules regarding this for the duration of the policy year.

3) Don’t Cover Them – But Provide an Allowance

Adding dependents into the plan may sound appealing, but it complicates things some. Some companies may prefer not to cover them as part of their group policy but may still want to provide some sort of benefit.

For this, I recommend providing an allowance to eligible employees. What that looks like is up to you, could be a stipend of $X per person or per family.

4) Don’t Cover Them At All

The last option is don’t provide anything, if they have family members, it’s their decision what they do with their health insurance.

What I Recommend

It really depends on:

• The company, their size, their industry, etc.
• Where they’re at in their lifecycle
• Their budget

An established international footwear company is very different from a local tech start up.  With the former, it would be seen as a necessity to cover dependents, that’s the market norm.  With the latter, it’d be great to include them. Tech is a very competitive industry, but as a start up, they may not have budget.

Overall recommendation, focus on your employees first. You can always build your group health insurance over time, but it’s hard to reduce.

Questions about your company’s group health insurance? Get in touch to start a transparent convo, get quotes & make an informed decision.