TOUGH TIMES MEAN TOUGH DECISIONS

State budget deficits in these tight economic times lead to shrinking budgets for school administrators. Let’s face it. They are under tremendous pressure to manage the budget. Costs for salaries, equipment, supplies, facilities, administration and technology continue to increase; yet. there’s no additional revenue coming in. Instead, they must make drastic budget cuts.

As if the pressure from rising operating expenses and decreasing funding weren’t enough, there are double-digit cost increases for medical insurance. Premiums for employer-sponsored medical insurance rose 12.7 percent the first six months of 2002, the largest increase in employer medical insurance premiums in 12 years.

Traditional Solutions Can Create More Problems

With only so many dollars available to fund your benefits budget, what can you do? Traditionally, you’ve had two choices to manage the cost of your benefits plan:

• Pass the costs along to employees in the form of higher premiums, coinsurance, deductibles and co-pays. The 2002 Kaiser Family Foundation survey says employees are paying more for health coverage: 27 percent more for single coverage and 16 percent more for family coverage. In addition, deductibles rose 37 percent last year.

• Redesign your plan to reduce benefits by eliminating certain areas of coverage in medical insurance or by eliminating other benefits such as disability, dental, vision or life insurance. The same survey reports that 17 percent of covered employees work at companies that offered lower levels of health benefits last year.

Both of these choices may ease your budget pressures, but they bring tremendous financial burdens to employees. The decision to cut or eliminate benefits can hurt your efforts to attract and retain quality employees.

Supplemental Insurance Can Stretch Your Benefits Budget

There is a cost-effective way to expand your benefits program and offer employees choices at reduced or no additional direct cost to you — supplemental insurance offered in addition to your core benefits program. With supplemental insurance, you can provide a menu of additional products that allow employees to fill in coverage or financial gaps in their insurance protection. Employees can also pay the cost of their supplemental policies through convenient payroll deduction.

Supplemental insurance provides protection in the following five coverage areas.

• Hospital confinement insurance helps fill the gaps in most major medical coverage plans and helps by providing benefits for a covered hospital stay.

• Disability insurance helps protect employees’ income. This insurance replaces a portion of income to help offset the financial losses that may result when an employee is disabled.

• Life insurance can be a valuable component to employer-provided benefits.

• Cancer and critical illness insurance is designed to supplement major medical coverage to help with the high-cost treatment.

• Accident insurance helps protect against significant out-of-pocket expenses not covered by major medical insurance.

And unlike major medical insurance, many supplemental products don’t automatically increase every year. Many products can also be paid for with pretax dollars.

Things Employees Like About Supplemental Insurance

In addition to choice and affordability, there are several things about supplemental insurance that appeal to employees.

• Flexibility — Employees can use their benefits payments in any way they choose: paying for deductibles, co-pays, coinsurance and other noncovered costs associated with hospitalization or outpatient surgery, or paying for transportation to the hospital or family member lodging and child care during a family member’s treatment. Benefits are paid regardless of insurance the policyholder may have with other companies. Benefits are paid directly to the policyholder unless otherwise specified.

• Choice — Employees select and pay for the coverage that meets their individual needs. A broad menu of supplemental insurance products gives employees more benefits options to choose from and allows them to personally tailor their benefits packages.

• Portability — Most policies are individual rather than group, so employees can keep coverage when they change jobs or retire. (An exception might be a disability policy.) In addition, the provisions of a supplemental policy don’t change when an employee leaves a job. Policyholders enjoy the same protection and coverage if they’re employed or unemployed.

• Stable Premiums — Employees who keep supplemental policies when they change jobs or retire may be able to keep the coverage at the same premium. Supplemental insurance premiums won’t go up simply because an employee no longer works at the company where the policy was first purchased.

• Continued Convenience — Paying premiums for supplemental insurance through payroll deduction is a big plus. If employees leave the job, in most cases they can usually continue that convenience simply by changing the payment method to automatic bank draft.

When you make the tough decision to reduce benefits or pass increasing costs on to employees, take a look at the supplemental insurance solution for cost management. To lessen the blow of reducing benefits or changing your current plan, consider offering your employees voluntary products as replacement or additional coverage. It’s a good way to enhance your benefits program, offer employees choices and manage your benefits budget.

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