When it comes to group benefits, we're all looking for ways to save money and control costs without sacrificing our team’s coverage. However, these shortcuts tend to provide a Band-Aid solution that damages the plan’s integrity.

The concept of "skin in the game", is no exception. It’s gained popularity in recent years to slow down increases in premiums. But is this practice truly effective in reducing costs or is it just a temporary solution?

What on earth is skin in the game?

"Skin in the game" is essentially sharing the cost of group benefits with your employees. It’s a tactic that many employers use when they can’t afford an upcoming increase in premiums. This practice involves asking employees to pay for a portion of their group benefits premiums. Employers believe that if employees are paying for the plan, they will be more likely to use it wisely instead of over-using benefits.

But is this practice truly effective in reducing costs? Unfortunately, the answer is not so simple. 

Asking employees to pay for the plan may give them ownership, but it can also result in employees trying to get the most out of their investment by using all the benefits. This, in turn, can lead to an increase in costs, rather than the intended decrease. From an employee perspective, they’re paying for the plan with after-tax dollars, meaning they aren’t getting the “tax-free expenses” perk that benefits are supposed to provide.

In the end, your premiums will go up and your team will be spending money on their benefits when they could’ve just paid for the expense out of pocket.

The proper way to do group benefits

So, what are the alternatives when you’re about to get walloped with an increase in premiums?

One option is to offer a Health Spending Account (HSA) or implement our Enhanced Health Blends (EHB). With an HSA or EHB, the Plan Sponsor pays only for claims, plus an admin fee. It’s completely transparent and provides cost control. Say goodbye to rising premiums and hello to peace of mind!

Your team also gains a different kind of “control” or “ownership” over their plan with an HSA. They get to decide what their benefit funds are used for. This flexibility to decide how they want to spend that part of their compensation can make them more appreciative and considerate of the benefits being provided.

What about an employee-funded HSA?

Some folks come to us after years of having employees pay premiums and say, “An HSA sounds great. I’ll contribute half and my employees will contribute half.”

They’re totally missing the point.

An HSA is tax-free for your team and tax-deductible for the business. Asking employees to contribute is making them use after-tax dollars. It would be the same as if they just paid for their expenses out of pocket.

Is there anywhere employee-paid benefits make sense?

If you’re truly a die-hard fan of the skin in the game tactic, there is one instance where it makes sense – Long-Term Disability (LTD). You can offer LTD in your plan, which employees can pay for using their after-tax dollars.

The reason this works and makes sense despite all we said above is because if employees were to go on to claim the LTD benefit, the benefit they receive would be non-taxable. This way, they aren’t getting the benefit taxed when they need it most.

I get it! But I want to learn more!

We love to hear that! We’d be happy to talk, just get in touch with our Growth Team and we can keep this party going. If you want some more New York Times Bestseller level reading, check out our blogs on supporting your team’s healthy lifestyles or how not to get hosed by your benefits provider.

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