Let’s face it, managing employee benefits is complicated and somehow it gets a little more complicated every year. You might be managing employee leave, a workforce with fluctuating hours, seasonal help and retiree benefits. What was once a basic reconciliation process, might now be a full-time job. How do you manage Direct Billing Services in an increasingly complex benefits landscape?
What are Direct Billing Services?
At the basic level, Direct Billing Services occur when an employer has a need to bill an employee or plan participant for a premium (or otherwise) and is unable to collect the payment through payroll deductions. Direct Billing Services through a third party would handle notifying the employee/participant what payments are due, provide a means to make the payment, provide notification when proper payment is not received and remit any received payments to the employer. Unlike COBRA, direct billing is not a Federally mandated benefit. Employers have more flexibility on how they would like to manage direct billing.
When might I use Direct Billing Services?
There are a variety of reasons direct billing may be necessary, but the reality is that direct billing services could be used for nearly anything any employer might need to bill its employees, outside of payroll deductions.
Retiree Billing has historically been the most common use for Direct Billing Services. In some companies (and often in the public sector), retirees may have the option to stay on the employer’s health plan. The retiree is likely responsible for some or all of the premium associated with the health plan, but is able to maintain coverage under the group. Direct Billing Services can be used to collect premiums from retirees on an ongoing basis. Additionally, these services can often account for special arrangements in which a portion of the premiums are paid by the employer.
Employees on Leave
Generally, when an employee goes on unpaid leave, it is not a qualifying COBRA event. However, the individuals are still benefit-eligible employees and must pay their share of premiums to maintain coverage. Direct Billing Services allow an employee to be billed for premiums while on leave and provide seamless coverage for the employees. Employers will sometimes manage employees on leave in-house by deducting additional premiums before and after the employee was on leave. However, this can result in higher payments for employees and reconciliation issues for employers. As employers grow in size and the length/frequency of leave increases, this approach becomes unsustainable.
Employees with Fluctuating Schedules
For some companies, a stable 40-hour work week is a pipe dream. During busy times, employees might be working 60+ hours a week. Other times employees may be struggling to get 20 hours a week. Meanwhile, this employee would likely be considered a full time employee under the Affordable Care Act. And, the employer would be expected to offer the employee benefits. However, collection of premiums might be challenging at times. When payroll alone doesn’t sufficiently cover an employee’s benefits, direct billing can be used as a means to collect these payments.
Part-time Employees Who Are Offered Benefits
Employers will often offer some or all of their benefits programs to part-time employees. These may be offered at the same or a pro-rated rate from full-time employees. Depending on the benefits selected, the payments required from an employee may be higher than the regular payroll amount the employee receives. Direct billing can be used to collect some or all of the payments required by part-time employees.
Certain voluntary benefits must be taken on an after-tax basis. Employers can simplify the management of these benefits by having payments paid through Direct Billing Services.
Why should I consider Direct Billing Services?
- It’s complicated. Billing employees directly is often highly customized and can be complicated to manage in-house. A third party can simplify the management of your direct billing needs.
- It’s labor intensive. Using a third party to manage direct billing allows you to focus on more pressing business needs.
- It’s flexible. Benefit Resource is prepared to assist you with your various direct billing needs. A robust online administration system allows you to quickly update and manage direct billing participants. To get started, simply request a proposal.