(PRWEB) December 12, 2012
Zane Benefits, the leader in Defined Contribution and Health Reimbursement Arrangement (HRA) solutions for business health benefits, today published an article for businesses exploring Defined Contribution as an option for employee health benefits.
We've all heard the buzz and read the statistics. Businesses across America are canceling traditional group health plans at a staggering rate. Many more businesses have never offered health insurance to begin with, due to high costs and minimum participation requirements. The vast majority of these organizations are looking to defined contribution healthcare plans as an affordable alternative.
How Defined Contribution Health Insurance Works
With Defined Contribution, employers have more control and employees have more choice. Instead of an employer paying for a defined benefit such as a group health plan, they fix their costs by establishing a defined contribution.
The employer determines how much their contribution will be, and what expenses are eligible. Expenses can range from health insurance premiums, doctor visits, prescription drugs, and much more. Most employers cover a wide range of expenses to make their defined contribution healthcare plan a full health benefit package. Other employers use defined contribution healthcare to supplement existing benefits packages, or to reimburse for dental or vision coverage.
Employees like defined contribution healthcare plans because they are able to choose an individual health insurance plan that suits their needs. Once a qualified premium or expense is incurred, the employee simply submits his or her receipts (using third party HRA software) for reimbursement. Because these expenses are reimbursed tax-free, the employer and employees can save up to 50% combined in taxes.
How to Determine if Defined Contribution Healthcare is Right for a Business
By completing a Defined Contribution Readiness Worksheet, an employer will be better prepared to discuss moving to such a plan with a broker. Here are some key questions that every organization must answer in order to determine if they are ready for a defined contribution healthcare plan:
1. Does the organization have 1 or more employees?
2. Has the organization offered several plan options for employees in the past?
3. In past years, has the employer passed health care coverage expenses on to employees?
4. Is it important for the employer to maintain a consistent contribution amount and allow your employees the option to buy up for the coverage they want?
5. Is the organization looking for a solution that can be more automated to facilitate employee choices?
When "yes" is the answer to these questions, transitioning to a defined contribution may be a good fit for a business. Discuss options with your broker, and make sure to include a talk with a defined contribution administrator who can explain how a defined contribution healthcare plan could work for a business today – or what businesses can do today to get ready for a defined contribution solution.