Why Employers Should Consider a Self-Insured Medical Expense Reimbursement Program (SIMERP)
In today’s competitive business landscape, with rising healthcare costs and a fierce battle for talent, companies are on the lookout for innovative solutions to manage costs while enhancing employee well-being. One such solution is the Self-Insured Medical Expense Reimbursement Program (SIMERP), which is particularly beneficial for businesses with 10 or more full-time employees.
Understanding SIMERP
SIMERP is a program that enables businesses to reimburse employees for medical expenses not covered by traditional insurance. This is accomplished through pre-tax payroll deductions, which generate savings that can be allocated to fund additional benefits. It’s an intelligent strategy to improve employee benefits without incurring extra costs.
How SIMERP Functions
At its core, SIMERP is a self-insured plan where employers draft a document specifying which medical expenses are eligible for reimbursement. These can include deductibles, copays, and extra coverage options such as:
- Telehealth services
- Mental health support
- Critical illness policies
- Accident insurance
By utilizing pre-tax deductions, the program reduces the taxable payroll, leading to savings on FICA taxes for both employers and employees. Typically, this can result in $500 to $900 saved per employee annually, which is redirected to a benefit reserve. This setup allows employees to maintain their take-home pay while accessing guaranteed benefits. Additionally, employers can reduce workers' compensation premiums by up to 30% in certain states, like California, by lowering the wage base subject to audit.
Benefits of SIMERP
- Cost Containment Without Compromising Quality: Traditional health plans often have gaps that can financially strain employees, increasing turnover. SIMERP bridges these gaps, promoting preventive care and reducing absenteeism.
- Significant Savings and Enhanced Retention: For instance, a retail business with 40 employees saved $25,560 in FICA taxes and reduced compensation premiums by 20%, achieving a 30% increase in employee retention within six months.
- Compliance and Simplicity: SIMERP adheres to ACA, ERISA, and HIPAA regulations, ensuring uniform and fair benefits. The setup is straightforward—submit payroll data, conduct a mock cycle, and enroll monthly—with no upfront fees and comprehensive support.
- Scalability and Savings Potential: Below is an estimate of potential annual savings based on employee numbers, assuming an average FICA relief of $639 per employee:
Scalability and Savings Potential: A Closer Look
Understanding the scalability and savings potential of a Self-Insured Medical Expense Reimbursement Program (SIMERP) is crucial for businesses considering this approach. By leveraging SIMERP, companies can achieve significant financial benefits through FICA tax relief and reductions in workers' compensation premiums. For example, a company with 10 employees could see an estimated annual FICA tax savings of $6,390, along with a reduction in workers' compensation costs ranging from $2,000 to $3,000, resulting in total potential savings between $8,390 and $9,390. As the employee count increases, so do the savings. For a business with 100 employees, the savings can be even more substantial, with FICA tax savings of $63,900 and workers' compensation reductions ranging from $20,000 to $30,000, leading to total potential savings between $83,900 and $93,900. This scalability makes SIMERP an attractive option for businesses of various sizes, offering a pathway to maximize savings while enhancing employee benefits.
Conclusion
SIMERP turns tax liabilities into financial assets, boosting a company’s competitiveness in a challenging labor market. By concentrating on wellness and efficiency, it enhances employee loyalty and productivity. Nevertheless, it is imperative to assess the risks and consult experts to tailor the program to your specific business needs.