What are ancillary benefits?

Ancillary benefits are a secondary kind of coverage used to supplement group health insurance. Ancillary benefits cover the miscellaneous medical expenses that occur during a hospital stay that are not included in a healthcare policy. Many individuals don't factor these seemingly insignificant costs into the price of healthcare, and ancillary benefits step in to take care of these surprise expenses. Ancillary benefits can also include other sought-after employee benefits, such as dental, vision, life, disability, and other types of insurance. Ancillary policies are typically quoted as a multiplier of the hospital's daily benefits, such as coverage for twenty times the benefit. In some cases, ancillary benefits are voluntary. Under other circumstances, the employer contributes to the pre-tax benefit.

Learn more about ancillary benefits

When do I need to be aware of ancillary benefits?

If you've recently spent some time in a hospital, or if you're an employer offering health care benefits to employees, you'll want to understand more about ancillary benefits. These benefits cover ambulance rides, medications, and medical supplies related to medical care that traditional health insurance may not fully cover. Employers who offer ancillary benefits can provide additional coverage options that complement traditional health insurance, enhancing overall employee satisfaction and well-being. Even if someone is given one acetaminophen while in the hospital, it's going to cost him or her, and ancillary benefits will take care of that cost. Additionally, ancillary benefits can serve as effective preventive healthcare tools that may lower medical claims costs in the long run.

What is important to know about ancillary benefits?

Ancillary benefits can involve voluntary plans, where the employer contributes from 0 to 40% of the premium, or employer-contributory ancillary benefits, where the employer pays 50 to 100% of the premium. Including ancillary employee benefits in an employee benefits package can significantly enhance overall employee satisfaction and retention. Employees pay whatever portion the employer does not cover through payroll deductions. The employer may cover the full cost of an employee's health plan and leave it to the employee to decide to purchase a voluntary dental or vision plan. Voluntary ancillary benefits are fully customizable for employees, allowing them to select coverage based on personal needs. Often, the offering of an employer-contributory ancillary plan encourages more employee enrollment.

There are advantages to both the employer and the employee when it comes to ancillary benefits. Whether the employer contributes more, or the employee voluntarily purchases a plan, it is beneficial in various ways:

Pre-tax dollars are used to pay for these benefits, which lowers an employee’s taxable income.
An employer offering ancillary benefits will be at the top of the competition when searching for valuable employees to join the team.
Some ancillary products are available for benefits not included in many typical health care plans, such as vision insurance and dental insurance, and preventative care is often included too.
Premiums are fairly reasonable with a generally large group of people participating in the plan.

Types of ancillary benefits

Ancillary benefits are a type of benefit that employees receive alongside their regular compensation. These benefits are designed to provide additional support and protection to employees, and can include a range of products and services. Here are some common types of ancillary benefits:

Life and disability insurance

Life and disability insurance are two essential types of ancillary benefits that offer financial protection to employees and their families. Life insurance ensures that an employee’s beneficiary receives a financial benefit in the unfortunate event of the employee’s death. This can help cover funeral costs, outstanding debts, and provide financial stability for the family. On the other hand, disability insurance provides income replacement if an employee becomes unable to work due to illness or injury. This type of insurance can be a lifeline, helping employees manage their living expenses during challenging times. Both life and disability insurance can be offered on a voluntary basis, where employees choose to opt-in, or as employer-contributory benefits, where the employer covers a portion or all of the premiums.

Dental and vision benefits

Dental and vision benefits are two popular types of ancillary benefits that focus on routine and preventive care. Dental insurance typically covers a range of services, including regular cleanings, fillings, and extractions, which are crucial for maintaining good oral health. Vision insurance, on the other hand, covers services such as eye exams, glasses, and contact lenses, helping employees maintain optimal eye health. These benefits not only support employees in managing their health but also contribute to overall well-being and productivity. Like other ancillary benefits, dental and vision insurance can be offered either voluntarily or with employer contributions, providing flexibility to meet the diverse needs of employees.

Benefits of offering ancillary benefits for employers

Offering ancillary benefits can significantly enhance an employer’s ability to attract and retain top talent. In a competitive job market, a comprehensive benefits package that includes ancillary benefits can set a company apart, making it more appealing to potential employees. These benefits also play a crucial role in improving employee satisfaction and productivity, as they show a commitment to the well-being and quality of life of the workforce.

Moreover, ancillary benefits can help reduce turnover and absenteeism. This, in turn, can lead to a more stable and productive workforce. Additionally, offering ancillary benefits can help employers reduce their medical claims costs. For instance, providing dental and vision insurance can prevent more serious and costly health issues down the line, ultimately saving the company money.

Ancillary benefits can also be a financial advantage for both employers and employees. These benefits can be funded with pre-tax dollars, which can lower the taxable income for employees and reduce the overall cost for employers. This tax advantage makes offering ancillary benefits more affordable and appealing.

FAQs

What is the difference between ancillary and voluntary benefits?

The difference between ancillary and voluntary benefits is that ancillary benefits are typically employer-paid and supplement the core health insurance plan, while voluntary benefits are optional, often employee-paid, and allow individuals to customize their coverage according to personal needs.