VOLUME 29, NO. 5

Gem Equipment has always had health insurance “available” for company employees and their families.  The term available is used instead of furnished since, for the last 20 years, employees have had to participate in the cost of health insurance.  Currently, for those employees “grandfathered” into the preferred provider organization (PPO) health insurance, the company pays 2/3 of the total premium and the employee pays 1/3.  The 2/3 that the company pays is roughly the same as the cost of the full premium for the high deductible policy available for this company’s employees.  The incentive for this high deductible policy is that current Federal law allows the employees to put pretax money, withheld from their paycheck, into a Health Savings Account (HSA).  As long as it is used to pay medical expenses, including the policy deductible, this money can be taken out of the HSA without incurring any Federal income tax.  Money not used for medical bills stays in the HSA.  Since most young people have low medical costs, a young employee, who steadily contributes to his HSA, has a good chance building a large account by the time he becomes old enough to need more medical care.    

In the company’s early years, the total cost of employee health insurance premiums was paid by the company.  In 1969, the monthly premium for employee, spouse and children was approximately 30 dollars, significantly lower than Gem’s half of the Social Security tax.  For fiscal year 2009, Gem’s half of the Social Security tax, including Medicare, was 77% of the total health insurance premiums paid by this company.  Note that these figures and all the ones that follow refer to the total costs paid by the company for all employees.  It should be noted that when the employee’s half is added to the employer’s portion, Social Security taxes are still more expensive than health insurance.  Total Workers Compensation premiums for fiscal 2009 were only 25% of the Health Insurance premiums.  To illustrate what a change this is, January 1990 was the first month that Gem’s total health insurance premiums exceeded the Workers Compensation insurance premium. 

Two factors combined to reduce Gem’s Workers Compensation insurance premiums.   In 1990, the Oregon State Legislature passed major reforms to the State’s Workers Compensation system that resulted in higher benefits for injured workers and lower premiums for employers.  Oregon Worker Compensation insurance premiums are still declining.  The other factor was a declining Workers Compensation experience rating for Gem Equipment.  Currently this company enjoys an experience rating significantly under 1.0, which is the average for all employers in any given class code. (For private sector organizations, the word industry can be substituted for class code.)  The cost of other employee benefits and payroll taxes, paid by Gem, add up to about 2/3 of the health insurance premiums.  This brings the total cost of all employee benefits and payroll taxes, not including health insurance premiums, to 1.69 times the health insurance premiums.  Stated another way, health insurance premiums are 37%, Social Security and Medicare taxes are 29% and Workers Compensation Insurance premiums are 9% of the total cost to Gem Equipment for employee benefits and payroll taxes.