If you're a health insurance agent, you know that many small to midsize businesses struggle to afford even basic health insurance coverage for their employees. Unfortunately, this scenario is not going away. Average employer health plan costs are predicted to rise 6.5% in 2021, topping the average annual 5% increase over the past decade, according to a leading organization of human resources professionals.

You are also likely aware that many businesses of this size struggle with recruiting and retaining key talent because they can't offer optimal health benefits. Unsurprisingly, top hires today make employment decisions based not only on salary but also on benefits, including health insurance. These employees seek coverage far beyond what a small company's primary medical plan typically offers.

With today's increasing premium costs and diminishing benefits, how can your small or midsize business clients affordably provide key talent with this added level of coverage? 

An often-overlooked—yet highly cost-effective—solution to this dilemma is key employee healthcare cost reimbursement plans. These fully insured, excepted benefits plans are also referred to as “select" or “executive" healthcare or medical cost reimbursement plans and are not to be confused with health reimbursement accounts. 

These plans are not subject to the requirements of the Affordable Care Act, so they can be offered to select employees at the employer's discretion. They typically provide tax-exempt reimbursement to key employees and their eligible dependents for medical costs not covered by their employer's primary health plan, including deductibles, copayments, coinsurance and other out-of-pocket costs.

Plus, they cover a broad range of expenses rarely covered by most employer-based plans, including dental, orthodontic, vision, hearing loss, in-home nursing, psychiatric care, speech therapy, infertility treatment, substance abuse treatment and many other medical services. Generally, if an expense is medically necessary and qualifies under Section 213(d) of the IRS Code, it is eligible for reimbursement.

With these plans, fixed and variable premium costs are tax-deductible for employers. Fixed premium costs vary by plan provider but the best of these charge an annual premium. Variable premiums incur only when employee claims are approved. Also, nearly all plans have a per-occurrence limit to prevent excessive claim amounts for the employer.

Some plans also provide participants other valuable insurance benefits at no additional cost, such as accidental death and dismemberment coverage, 24/7 worldwide travel coverage, and healthcare concierge and travel coordination services.

Generally, these plans can be added to any employer's underlying group plan, individual policy, spousal policy or Medicare plan. They usually have no pre-existing condition exclusions, limited eligibility requirements, and no enrollment waiting periods.

Additionally, excepted benefits plans offer several advantages over health savings accounts, HRAs and other consumer health accounts. These accounts are limited in funding amounts and funding usage—making at best a 50% dent in employee out-of-pocket costs. Plus, they do not provide true insurance, coverage, benefits and value as excepted benefits plans do.

Excepted benefits plans offer your clients a cost-effective way to boost primary health plan benefits for key employees, recruit, retain and reward top talent, and differentiate their total compensation packages from competitors.

Additionally, they offer licensed independent agents and brokers a powerful new product that can boost their business value as a problem solver for their clients' insurance needs.

Steven W. Jacobson is the founder, CEO and president of Sankaty Light Benefits, a health insurance and services company that provides businesses with cost-effective solutions to today's costly healthcare environment and highly competitive workplace, such as its new ExecSelect™ plan.