Owners: How to Make More Moolah, Almost Certainly

Veterans and Seniors Are Valuable Employees

Let’s leave aside the idea that veterans and seniors are great people. There is good and bad, in everyone (so said Michael Jackson and Sir Paul McCartney, a long time ago). There are financial reasons that these employees can benefit small employers.

VA Health Benefits Can Be Better, and Cheaper

Veterans Administration benefits are brutally difficult to understand. However, the prescription costs alone are worth the trouble. Why? The Veterans Administration is allowed to negotiate drug prices directly with pharmaceuticals. This is different than any health insurance company, and this is different than Medicare/Medicaid. The out-of-pocket expenses for veterans, when it comes to prescriptions, is lower than under almost every other plan.

If a veteran wants to use VA benefits, he/she needs to use the VA network. That said, the limits of the VA network have also been addressed. Given the controversy surrounding Veterans benefits, veterans can use out-of-network providers as well, if no provider is available.

The bottom line is that VA benefits are superior, given the price (health services are $0), compared to small group or individual health insurance in the private market.

Medicare is Much Better

It is not close. Medicare Part A has no premium. Medicare Part B premium is $134.00/month for most (higher for high-income individuals). Medicare Part D runs between $15-25/month in most instances. The cost-sharing is far superior to any Gold/Silver/Bronze tier plan under the ACA. “Extra insurance,” Medigap or Medicare Advantage, can be as low as $0, and run to $200/month for a 65-year old, depending on location.

Add the total costs, which is $134 + $25 + $200 in the absolute worst case = $359/month. Now, compare that to the total premium of any group plan. Not even close, this will be at least $500/month lower, i.e. $6,000 a year.

Mistakes Both Employers and Employees Make

Employees at small companies are over-dependent on the knowledge and guidance of the small business owner. This is natural, and understandable. However, you cannot presume that the small business owner commands every detail of VA benefits or Medicare. The result of this is that the employer will naturally overpay for small group health insurance when it contributes towards health insurance (unless it is a strict dollar, defined-contribution method).
So what to do? Both employers and employees can benefit by simply adjusting the employee policy, which incentivizes the employee to not accept the employer-sponsored plan, and to choose to rely on either VA benefits or Medicare with Medigap/Medicare Advantage. The savings, per employee, can be thousands of dollars a year.

It Gets Worse

Due to the complicated rules of Medicare, there are special periods (when a person first turns 65 years old), when the best coverage, at the lowest premium, is available, with no medical questions. A person could have an incurable disease, it will not matter. However, when the enrollment period ends, then the employee will have a restricted set of options. That restriction can reduce the financial advantage mentioned in this article.  And it gets worse. Let’s say a senior employee retires, and then chooses wrongly (again), then the options can be much more restricted, leading to much worse coverage, with no cost advantage. This happens now, and this will continue to occur as the workforce ages.

How Does This Happen?

This is the fault of the way that employers get advice or professional services. Insurance is largely segmented by size, either private (retail) or employers (commercial). The problem is that brokers/advisors are busy servicing one set of these two, without detailed knowledge regarding how the other works. When the right hand doesn’t work well with the left hand, a problem is bound to occur. Small business owners are busy keeping the lights lit. The office manager is busy wearing multiple hats, without the financial incentive to substantially improve everyone’s financial well-being, if he/she is not direct affected. If you add these ingredients, you get the inevitable outcome. This situation is happening at a small employer in your town, irrespective of location.

Small Businesses Have the Advantage

If you are the employer or employee at a small business, then the flexibility that you have is far greater than at a large employer. While work is required, both employer and employee can find a “middle ground,” which results in higher pay/better benefits for the employee, and greater profitability for the employer. At a combined benefit of multiple thousands of dollars a year, per employee, well worth the effort.