How to Account for Health Insurance Expenses
Health insurance benefits are key to attracting talented employees to a company. Many companies try to balance employee health needs with cost effectiveness. Finance managers must determine what portion of retained income should be spent on employee health insurance. Accounting for the insurance involves many factors including employee needs, company budget and industry standards. Health insurance packages fulfill different roles for employer and employee. For the employer, the quality of health insurance programs relates to the quality of employee the company wishes to attract. For employees, health insurance benefits help determine quality of life.
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Instructions
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Figure out how much funding can be set aside for health benefits. You may end up going under or over budget, but it's a good idea to have a rough idea of how much you can spend.
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Determine which employees receive health benefits. The company may not wish to extend health benefits to some lower-level employees or employees in high-turnover positions.
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Decide if different positions receive different health insurance packages. You might decide that higher-level employees, managers and employees in hard to fill positions have more inclusive (and more expensive) benefit packages.
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Plan the amount of time until a new employee's coverage begins. Some companies have health insurance plans that start covering the employees on their first day of work, while other businesses have a probationary period of a month or more.
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Choose which of the employee's family members (if any) the health insurance package covers. Packages can include just the employee, the employee and dependents (children, disabled adults) or the employee plus dependents and spouse.
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Determine whether the company allows flexible benefits. Flexible benefits allow the employee to choose their own type and level of health benefits and balance health insurance with other types of compensation such as salary, child care and time off.
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Decide the level of employee contribution. Some health plans require the employee to contribute money to the plan, while others are noncontributory, meaning the employer pays all costs.
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Choose a health insurance company that meets your business' budget and employee requirements. You may request quotes from several insurance companies before choosing the one that's the best fit.
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Subtract your health insurance cost from the amount initially budgeted for health insurance expenses. If you have a deficit, you've gone over budget and you may need to adjust some factors of your business' health insurance plan.
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References
- Financial Web: Medical Insurance Basics
- "Compensation, Eighth Edition"; George Milkovich, et al.; 2004
- "Entrepreneur"; Finding Health Insurance as a Startup; Eileen Figure Sandlin; October 2006
