Benefit Premiums based on Salary

Hi.. Just wondering if there are any hospitals basing their premiums for benefits on an employees salary. And if so if you would be willing to share how you have it set up. We have been asked to look at this, however with the constant movement and and wage changes throughout the year not sure how to do this where it is fair to all. They suggested looking at gross wages at a point in time, however if someone reduces their FTE or moves to a position that now pays less is it fair to charge them what they were paying for the higher income? And if we have the premium change with their current wage, how to do it so it is automated and not a manual process.

If anyone is a hospital and willing to share how they have it setup I would greatly appreciate it.

Thanks

Sylvie

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unknown

Hello!

Yes, we do have a different premium rate for employees making less than a certain hourly rate of pay. We call it a premium assistance program for those at the low end of the pay scale where we pay a greater share of the premium for the employees in that group.

We set those rates once per year and lock them in for an employee. The reason we do that is we don't want to see an employee get a small raise of say $0.20/hour and suddenly seeing their premiums increase. So what we do is use the Benefit Salary 1 field on HR11. We look at the employee's current hourly rate of pay before we start our annual Open Enrollment and then load that rate of pay into the Ben Salary 1 field to "lock" their rate for the next year. If they get a raise during the year, it won't affect health insurance since the Ben Salary 1 hasn't changed.

New hires will also have a Ben Salary 1 entered to match their pay rate at time of hire.

This strategy holds their pay rate for purposes of health insurance premiums steady for a year and they would only see an increase in January when we start a new plan year using an updated Ben Salary 1. We do also increase the hourly rate a little bit each year to try and keep pace with raises but still give premium assistance to those at the low end of the pay scale. For example, last year anyone earning $15.54/hour or less was eligible and this year it is anyone earning $16/hour or less. If someone got a raise last year from say $15/hr to $17/hr, they kept premium assistance rates through December but are now paying the regular premium rates for 2021.

You can easily use the Ben Salary 1 in employee groups to identify people earning more or less than the pre-determined rate and give them the correct premium rates based on that value.

If you decided you wanted it to change premiums during the year based on pay rate changes, you would have to set up a change rule on BN16.3 for any salary changes to trigger the BN100 to remove the employee from the group getting a lower premium and instead put them in the group with a higher premium. That should then update their premium on BN32. We do that for FTE changes now as those lead to an immediate change in premiums.

Hope this helps!

Emily

Sylvie Vincenti

Thanks Emily. They are looking at having several bands not just one for those making under a set hourly rate. And they wanted to look at gross wages at a set time to include all the additional differentials they get. If I can get them to look at only Base Rate and convert Salaried employees to an hourly rate for this then we could maybe use this process. I will share this with them and see if they want at least to start... just looking a doing something for those under a set hourly rate. Thank you.

unknown

If you include salary class in your group criteria, you might not have to convert salaries to an hourly rate...

unknown

You could do a gross wage amount on the Ben Salary fields as well and program that into the employee groups. It would definitely be more complicated but certainly doable. So if they determined that anyone under a gross salary of $50,000 is in one band, those between $50,000 and $75,000 in another band, etc. You would just have to list the salary in one of the Ben Salary fields and then build an employee group for each band that you want.

Sylvie Vincenti

Correct it is doable. I guess more so then how is are other hospitals doing it where they have the multiple bands - how many bands and what they base those bands on, do they allow for movement throughout the year or based on a point in time. We have found no hospitals in our area that is using this method for determining premiums so were wondering if any hospital was for their entire staff, not just lower income employees. We have found a few non-hospital companies doing it, but they are all office-type and don't have the movements we have they change someone's wages throughout the year. Thanks

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