What Are Ancillary Benefits?

As more and more of these benefits become available, it can serve you well to become aware of their increasing value to your current team and potential recruits. If you are involved in the decisions impacting your company's benefits program, it can be helpful for you, your organization, and its team members to be as familiar as possible with its potential components. 

Today, more than ever, there are creative options available to keep your company attractive in maintaining your current staff, and in recruiting top-talent. It doesn't always have to result in budget-busting benefits. There are available programs to make your company more appealing without overspending.

One such area to be aware of is what are known as ancillary benefits. What is the definition of ancillary benefits and when should you be aware of them? What is important to know about ancillary benefits and what are their pros and cons for employers and employees? Most importantly, how can ancillary benefits help your company remain competitive in retaining and recruiting top-notch staff? Ancillary benefits should not be overlooked as a valuable retention and recruiting tool for your business.

Here is a closer look at ancillary benefits and the role they may play in your organization's employee benefits program. You may be surprised at the affordable and attractive options available for your organization.

Ancillary Insurance Definition

Ancillary benefits are defined as a secondary layer of coverage used to supplement group health insurance. It can be used to fill gaps in coverage or reduce the risk of devastating healthcare expenses for employees.

It is most frequently purchased in conjunction with major medical insurance and can include benefits such as vision and dental care that may not be addressed by a company's current major medical program. Policies such as hospital indemnity, critical illness and cancer insurance may also be offered to help employees with out of pocket costs that reimburse the insured for covered illnesses and expenses. Ancillary benefits can even include policies that provide financial protection for employees' families such as life insurance, disability insurance, and identity theft protection.

Ancillary benefits are a powerful trend that is allowing small to medium sized companies to compete with larger or more well-funded competitors. Ancillary benefits, overall, provide an affordable alternative for both employers and employees to increase health care coverage at optimum pricing. It uses the power of "buying in bulk" for groups as opposed to purchasing benefits individually.

When to be Aware of Ancillary Benefits

Employee benefit administrators should always be aware of trends in ancillary benefit programs, but there are several times when awareness should peak. These include when changes are being made to major medical program benefits and when recruiting efforts increase. Ancillary benefits are an excellent way to round out a major medical benefits program as well as increase your company's appeal to new recruits. 

It is also valuable in retaining quality employees to maintain your competitive advantage and for recruiting in the current employee marketplace. Of course, it is also important to be aware of ancillary benefits when experiencing a claim that may not be fully covered under your company's major medical program. If employees appear to be disgruntled under your current benefits program, ancillary benefits can provide an appealing solution.

What is Important to Know About Ancillary Benefits

Perhaps the most significant aspect to understand about ancillary benefits is that they fall into two broad categories. Ancillary benefits can fall into three different categories depending on the amount the employer is contributing to the coverage: voluntary, contributory, or non-contributory. In voluntary plans the employer usually contributes zero to 50% of the plan costs. For contributory plans the employer usually pays at least 50%-75% of the premiums (varies from carrier to carrier) while the employees pay the remainder. Noncontributory plans are ones in which the employer pays 100% of the premiums (which means all eligible employees must be enrolled). Just like with health insurance, any portion of premiums that employees are responsible for are usually paid through payroll deductions. This helps assure that administration is easy and straight-forward.

Pros and Cons of Ancillary Benefits to Employers and Employees

There are benefits to both the employer and the employee through ancillary benefits whether the employer contributes or if the employee voluntarily pays for the benefits.

• Most benefits are paid through pre-tax dollars, which lowers the taxable income for employees. This both increases their benefits while lowering their tax burden.
• Employers can be more attractive to both current employees and to recruits when offering ancillary benefits. It provides another option for potential employees and weighs the scale in favor of employers who offer them.
• Ancillary benefits can help round out a major medical program by offering benefits like vision or dental that may not otherwise be included.
• When a larger group of people participate, ancillary benefit program payments are usually very affordable.
• Ancillary benefits can provide employees’ families with significant financial protection through life and disability insurances.

The fact is, ancillary benefits have become an increasingly vital part of many small to midsize companies. They are appealing to employees because it increases benefit options, which are often paid for with pre-taxed dollars. It is valuable to companies of all sizes because it provides them with an opportunity to offer current and potential employees valuable benefits at little or even no expense to the employer.

Advanced Estate and Insurance Services (AEIS) was created to assist small and medium sized businesses (2 to 500 employees) make the most of their employee benefits programs. We keep our clients competitive in recruiting superior talent with exceptional benefits and programs that are affordable. Our mission is to help you maximize your employee benefits package while staying within your budget. If you are struggling with increasing healthcare and employee benefit expenses, connect with us for a no-obligation review and a look at the innovative options now available. We encourage you to contact AEIS today. We are rooted in the protection and success of your small to medium business.