What Does it All Mean? What Am I Being Offered? An Insight to "First Dollar" Coverage
I’m going to piggyback off Jason’s post from 2020 (Read Here) and add a little more color.
Every employer is trying to find the perfect balance of employee retention and cost maintenance. In the middle of that is the employee benefits package. There are so many benefit options out there, but how do you know which is the right one?
Over the years, we’ve had inquiries from contractors asking about this “First Dollar” type coverage. It’s being touted as the best option to offer instead of a traditional group medical insurance plan. So, what is it and is it the best option?
"First Dollar" Coverage - Also referred to as a "Healthcare Plan"
“Healthcare Plan” sounds like traditional medical insurance, right? Wrong. With First Dollar plans, set benefit amounts are paid out based on the situation or procedure that took place. Break a leg and need outpatient surgery? The plan pays you X amount, or $1,000 for example. Stayed the night at the hospital? The plan pays you $2,000. So on and so forth.
Here's an example of how this coverage plays out
Joe Smith with Delivery Company, Inc. needs his appendix removed. The total hospital bill came out to $30,000 (the average cost of a 3-day hospital stay is around $30,000)
- Scenario 1: Joe only has First Dollar coverage and they will only pay a flat benefit amount of $5,000 for this surgery. Joe's happy with that $5k until he receives his $30,000 hospital bill in the mail 3 months later. The First Dollar plan paid for those "first dollars," but Joe is left to pay for the remaining $25,000 all by himself.
- Scenario 2: Joe has a traditional medical insurance plan, he meets his deductible and out-of-pocket maximum (if applicable), and the medical insurance pays the rest. Even on a high deductible health plan his total out-of-pocket costs wouldn’t have exceeded $9,100.
Which plan would you pick? And believe it or not, the monthly premiums are relatively close too.
The recent popularity of these “First Dollar” plan designs within the Last Mile world is not surprising. Contractors want to offer traditional medical insurance to their employees, but it seems costly, time consuming, and filled with uncertainty. First Dollar looks like the quick fix-all, but as you see in the example above, it can lead to significant liability consequences if not properly explained and ultimately leave everyone dissatisfied. The opposite effect you want from your benefits program.
The “First Dollar” healthcare plans serve their purpose. They are a great supplemental coverage. What they don’t offer is a sustainable medical healthcare plan for your employees. They should never replace traditional medical insurance. If an insurance agent suggests you do this, run for the hills.
Building a competitive employee benefits package with traditional medical insurance takes effort and forethought from an experienced and diligent agent. GDLM has been building and installing these benefit programs for contractors for 13 years. Interested in learning more? Reach out to me. You’ll be surprised at how attainable it is when you partner with an agency willing to do the work.
Questions? Contact Me:
Schuyler Moore: smoore@grovedavisins.com
