We’ve all seen them. The pie charts, the itemized breakdowns, the lists of company benefits and compensation items. HR departments promote it at annual review, and HRIS systems market the easy way that they allow it to be calculated. It is the total compensation statement.

 

I was speaking to a friend and it occurred to her that, based on actual take home pay, they are below federal poverty level as a family of 6; however, based on “total compensation”, which factors in their overpriced, low-value health insurance plan, the city’s contribution to that health insurance plan is what brought them above federal poverty if they looked at his “total compensation”.

 

I’m sure this is the case for public and private employers, as many stubbornly stick to fully insured, “comprehensive” health plans offered by the major carriers. The ever-rising premiums require more subsidy from employers eroding their ability to provide meaningful pay increases that actually impact the lives of employees and their families. 

 

It would be one thing if the contribution to the health plan actually went to a plan that provided a real, tangible benefit. One that allowed confidence that their physician visit would be part of a low, one-time payment or that their prescription drugs were covered by the plan versus having to do a financial forensic investigation to see if their health plan was actually giving them the best deal. But what we see so often is these premium contributions that go to insurance are, in many ways, empty gestures. The juice, for the employee, often isn’t worth the squeeze.

 

It begs the question that has to be asked: is it on purpose? Do finance and HR departments leverage the tax advantage of contributing to insurance premiums, inflating the total compensation statement, to avoid providing real wage increases to employees?

 

The good news for employers and employees, alike is that the best of both worlds is possible. For decades, “good insurance” has been marketed as a way to attract and retain a quality employee base. But we contend that insurance alone is not the answer. When insurance is a part of the benefits equation, and we look to other arrangements available in the tax code, medical cost sharing strategies, and direct-to-physician contracting, actual useful  benefits can be offered, total compensation calculations can remain competitive, and employees can actually receive a benefit they and their families can use.