Are you asking yourself, what in the world is a "Defined Contribution Health Plan"? I'm sure it's not a term that most of you are aware of or even know that it could be a viable option for you, the small business owner, to implement for your workforce. It's really a fancy term for a health plan that is established by the employer but the method of paying for the monthly premiums are based on a fixed contribution made by the employer toward paying for health insurance. Okay, I've got you confused. Sorry! So by way of comparison, a regular employer-sponsored plan is one in which the employer offers its employee groups of 2 or more but the ultimate legal guardian of the plan is the company. Things like the payment monthly premium, renewing the plan each year, being responsible for the administration of the plan and finally being in compliance with federal and state laws governing them (eg. COBRA). This type of health plan is also know as a "Defined Benefit Health Plan". The employees simply opt in or out of the plan. If they opt in, the employer has an established pre-determined amount that the employee has to contribute each month toward covering their dependents and such. This amount is usually deducted from the employees paycheck every pay cycle. Sometimes the employer has the deductions set-up on a pre-tax basis to add tax savings for both the employer and employee. This is typically the way most group health plans are set-up.
However, this is not necessarily the best advise for the small business who is struggling with the mounds of administrative responsibility now incurred, not to mention, the continued escalation in health insurance premiums every year. There is a better way - Defined Contribution Health Plans.
The defined contribution concept can manifest in numerous ways. The ideologically purest model is one in which employers remove themselves completely from administering health benefits by either giving the employees cash (as a separate payment or increased wages) or a voucher that they can use in the market to purchase coverage. At the other end of the spectrum is a defined-choice model in which employers continue to offer a range of health-benefit options at varying price levels. The employer provides a specified premium dollar contribution (perhaps tied to the lowest-cost plan), and the employee pays for any premium difference above the contribution level. Between the two end points, there are numerous permutations. Some of these “in between” models rely on a combination of an employee personal health care account with contributions from employers, employees, or both (which can roll over annually), and major medical coverage with a deductible above the cap of the personal account. For a copy of this free report go to: http://hcfo.net/pdf/definedcontribution.pdf
This is the absolute best option for small businesses in the Lehigh Valley trying to find ways to reduce cost and liabilities, as well as, get out of the health insurance business. For more information on establishing a defined contribution health plan at your company please email me at: bknauss@employeemployersolutions.com or visit my website at http://www.employeemployersolutions.com/ Now go take on the day!!
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