Q. Due to rising premiums, our company is looking into alternatives to reduce our group health benefit costs. Several employees are on our plan and their spouses' plan. They are willing to go off our group plan if we compensate them “x” amount of dollars each month. Is it legal to offer the medical insurance benefit or a cash alternative? —S.P., Michigan
A. Absolutely, yes. It's perfectly legal to offer a fixed “opt-out” payment in lieu of health insurance. In fact, many employers use this method effectively to cut the rising cost of health insurance. This begs the question: How large should you make the opt-out payment? You want to make it sizable enough to induce employees to avoid “dual coverage,” but not so hefty that employees choose to go altogether uninsured and take the opt-out payment.
Another option: Require employees to contribute toward the premiums. Employees with dual coverage are usually quick to drop unnecessary coverage when part of the cost is coming from their pockets.