Zane Benefits Publishes New Information on Pure Defined Contribution Health Plans

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New Small Business Insurance Options Act Like a 401-K for Healthcare

Today, Zane Benefits, Inc. published new information on pure defined contribution health plans. Zane Benefits, which provides comprehensive and flexible alternatives to traditional employer sponsored health benefits, is the leader in defined contribution and health reimbursement arrangement plans.

According to Zane Benefits’ website, defined contribution health plans are fast becoming popular with small businesses as an alternative to group health insurance. With a "pure" defined contribution plan a business contributes a fixed dollar amount (a "defined contribution") toward employees' health care costs, including purchasing their own personal insurance policies.

The shift from employer sponsored plans (a "defined benefit") to defined contribution health plans is similar to the shift in retirement savings from pensions (a defined benefit) to 401Ks (a defined contribution). After realizing the savings associated with moving away from defined benefit retirement plans, many businesses are also applying this model to their healthcare benefit programs.

However, the term "defined contribution health plan" has become a buzzword in the industry, and doesn't always mean the same type of heatlthcare benefit. This article provides a definition of a "pure" defined contribution health plan.

Pure Defined Contribution Health Plan

According to Zane Benefits’ website, with a pure defined contribution health plan, the business offers health benefits in the form of a stand-alone Health Reimbursement Arrangement (HRA) instead of a group health insurance plan. The business simply uses the HRA to reimburse employees tax-free for their personal insurance policies (and other eligible medical expenses, as the business defines in their HRA plan).

Pure defined contribution health plans allow the business to get out of the insurance business. A pure defined contribution plan is not linked to a group health insurance plan. Rather, the defined contribution health plan is the business's health benefit.

According to Zane Benefits’ website, with a pure defined contribution health plan:

  • The business provides employees a fixed monthly allowance for health insurance premiums and other eligible medical expenses. No group health plan is offered.
  • Employees purchase their own individual health insurance premiums (often with the help of a broker or agent). Employees have unlimited choices in policies, and can purchase any type of plan from any carrier. Starting in 2014, employees can purchase policies through the new state health insurance marketplaces. Also, in 2014 all personal policies will be guaranteed-issue and massive individual premium tax credits will be available for plans purchased through the marketplaces.
  • Using HRA Software, employees submit their expenses and the business reimburses them tax-free on payroll, up to the amount available.

According to Zane Benefits’ website, defined contribution health plans provide the same tax benefits as a group health plan. However, one hurdle preventing some businesses to switch to a defined contribution health plan was key employees with a pre-existing condition. In 2014 this hurdle goes away. With guaranteed-issue policies starting in 2014 and massive tax subsides through the health insurance marketplaces, defined contribution health plans now have all the same benefits of a defined benefit (group health insurance plan), often at a much lower cost for the business and employees.

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About Zane Benefits
Zane Benefits was founded in 2006 to provide a revolutionized SaaS (Software-as-a-Service) administration platform ("ZaneHRA") for Health Reimbursement Arrangements (HRAs) and defined contribution health care. The flagship software provides a 100% paperless administration experience to employers and insurance professionals that want to offer better health benefits without a traditional group health insurance plan at lower costs. For more information about ZaneHRA, visit http://www.zanebenefits.com.

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Christina Merhar
Zane Benefits
800-391-9209 6725
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