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As a small-business owner, you face many challenges in light of the Affordable Care Act (ACA). Group health insurance premiums and deductibles are continuing to rise, which only makes obtaining coverage for your employees more difficult to manage. To control costs over the long term, many small business owners are turning to defined-contribution health plans to manage the rising cost of health insurance.
Your business could benefit significantly from a Defined-Contribution Plan. Contact us today to get expert advice about how to save money on insurance for your organization, or compare insurance plans right now to get started.
What Are Defined-Contribution Plans?
Another name for a defined-contribution health plan in the insurance industry is a health reimbursement account (HRA). You may be more familiar with defined-benefit health plans, which provide a specific list of coverages and methods for cost-sharing (i.e., co-payments and coverage for prescription drugs). Defined-contribution health plans are quite different, but these plans may be the solution you are looking for.
As an HRA, a defined-contribution health plan is an arrangement between your company and your employees to share the costs of individual health insurance. Defined-contribution health plans differ greatly from group health insurance because HRAs do not meet the ACA’s minimum coverage requirement. Under the ACA, small businesses do not have to provide insurance to “full-time equivalent employees,” but HRAs may give you a new way to manage your company’s health care costs – and offer coverage for the first time.
How Do Defined-Contribution Health Plans Work?
In a defined-contribution plan, you and your employees share the cost of health care expenses. This method of controlling health insurance costs gives your employees more freedom to choose a plan other than group health insurance for small businesses. In some cases, your employees may need more comprehensive benefits than a limited-benefit group health insurance plan can offer.
Think of a pre-existing health condition as an example of a real-world situation that would force an employee to make the difficult choice to opt-out of employer-sponsored health insurance. The ACA forces the health insurance industry into a “guaranteed issue” market. Guaranteed issue means insurance companies cannot use pre-existing conditions to disqualify an individual for health insurance. Without an HRA, your employee would be forced to pay out-of-pocket for the insurance plan they need – but cannot afford.
Even if you want to offer the best group health insurance benefits to your employees, the cost of premiums and deductibles – which can be as high as several thousand dollars per month – limit your choices. Defined-contribution plans give you more options by making health insurance costs more predictable. For instance, you may decide to offer your employees a premium-only HRA, which will reimburse employee for health insurance premiums by a fixed amount.
The ACA forces you to make tough decisions regarding the health insurance you provide for your employees. Given the uncertainty and confusion which still surrounds the ACA, small businesses need a custom solution provided by an insurance specialist that can provide straightforward answers. Otherwise, you may not be taking full advantage of the cost-sharing benefits of defined-contribution health plans.
If you would like to learn more about Defined-Contribution plans, please see our Defined-Contribution Frequently Asked Questions section.
We can help you find an affordable insurance plan that meets the needs of you and your employees. Contact us today!
