If you’re a part of a small company, then you should know that health insurance costs are going to rise and have already been. Many employers are searching for new ways to offer health insurance at a more affordable price. One way is with defined-contribution health care. Understanding why defined-contribution health care is a good option for a small business is essential to determining if this is the best choice for you.
What it Is
These small-firm insurance plans are sponsored through the employer. The costs of the plan are shared between the employee on the plan and the employer offering it. The coverage may also include employees’ families. Group health-insurance plans might also be available to the self-employed in some states.
There are many different types of insurance plans out there for small businesses. However, many companies can’t afford this type of health-insurance coverage for their employees. Due to costs, a lot of smaller companies are looking at starting a defined-contribution strategy. This is not a health-insurance plan, but rather a way for the employer to play a role in offering help with insurance expenses.
Why Small Firms Choose This
There are a few different reasons why small firms choose to go with this type of health-insurance coverage for their employees.
- Costs are Controllable – The firm can fix the costs since it can decide how much to give. There are no minimum requirements to abide by and these requirements can change from year to year.
- Different Employee Classes – Depending on the employee class, the allowance can vary. The firm can set a different amount based on the employee’s job or family status. This is more attractive to employers since they can ensure that everyone is covered as needed.
- More Time with Clients – The firm can offer health benefits to employees in less than five minutes per month. This then becomes a function for payroll and requires little to no involvement from the employer. No renewals are needed each year and employees maintain their own relationships with the insurance company.
- Compliance – Smaller law firms are quick when it comes to adopting this type of insurance plan. They understand more about the compliance for using this type of plan and the importance of being able to comply with the different sections that are involved.
Simple Steps to Choose Defined-Contribution Health Care
- Set a date to turn off the group health plan that you currently have, if any.
- Define a set amount or budget that your office is able to safely afford.
- Select the insurance professional to help each of your employees find the right policy for them.
- Utilize different software programs for administering and reimbursing employees for their plans.