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The Small Business health insurance market is going through tremendous change now. The Affordable Care Act (commonly known as Obamacare) has caused a number of changes in Group Health insurance, encouraging small business owners to seek out alternative plans that offer great insurance at an affordable rate. Businesses are exploring cost-effective group health or defined contribution plans. They want to ensure they are providing choices that will keep employees happy while keeping costs down.
Health-care reform may be ushering in more coverage plan choices, but it can also be confusing when trying to find the right plan for your business. When comparing plans, many businesses look at the premium costs and coverage levels to find options within their budget that will appeal to employees. However, with all the changes in recent years, it is important for companies to step back and look anew at group health insurance plan designs, what benefits your employee demographics might value the most, and the newer defined contribution options.
How They Differ
New plan designs, changing costs and coverage difference can be confusing. Here are key points about group health insurance plans and defined contribution health plans.
Group health insurance plans are:
- Employer-sponsored and chosen plans that deliver health care benefits to owners, employees and dependents;
- Designed with defined benefits that outline specific coverages, copayment amounts and deductibles, often within a limited provider network; and
- Paid for by employers who typically cover a percentage of the employees’ monthly premium.
Defined contribution health plans are ones where:
- The employer provides a fixed amount of dollars toward their employees’ health care costs,
- The employees are then responsible for purchasing their own individual medical insurance policy, and
- The employees are actively aware of the cost implications of decisions made and the implication of expensive choices.
In group health insurance plans, employers manage the health care costs by adjusting benefit levels or copayments annually. In defined contribution plans, the employee takes the reigns and controls health care costs by the choices they make.
While group health plans are similar to defined-contribution plans, they often make it difficult for employers trying to control health care costs who may face large rate increases. The Defined-contribution structure makes it easier for employers to budget since they know up front how much they contribute to employees’ health insurance. This is why many employers prefer Defined-contribution plans to Group Health in the wake of Obamacare changes.
Getting Professional Help
Your expertise is your field, not health insurance. Get professional help evaluating the options being considered and what adjustments in the plan (or plans) may be most beneficial for your firm and your staff.
Offering a defined contribution option gives employees more flexibility without creating a greater bureaucratic human resources burden on the employer. To be successful, however, the defined contribution plan has to be set up through a broker that understands small business and the health care options in the state. Contact us today to get started on a plan that is affordable for you and your employees!
Custom Health Plans specializes in the small business health insurance market. Whether for two and 50 employees, Custom Health Plans helps clients figure out whether traditional group policies, high-deductible plan incorporating the new Health Savings Accounts (HSAs) or defined contribution plans make more sense and save more dollars for your firm.