Defined Contribution Health Plans Overview

Health care reform has spawned a great deal of change in the group health insurance arena. One modification that many workers appreciate has been a trend toward offering them a bigger say in how their benefits are allocated.

A number of companies have moved to the “defined contribution” benefits model since the Affordable Care Act was introduced.  Defined contribution just means that employers are giving their employees a lump sum dollar amount to spend on their benefits – and the employees get to decide how to allocate the money.

Employers are attracted to the defined contribution model because it can help them to lower health care costs and offer their employees a choice in the benefits they receive.


Savings for companies, control for employees

The move from a defined benefit plan to a defined contribution health care plan became popular after companies shifted their retirement plans from defined benefits like pensions to defined contributions plans like 401Ks.  These changes created savings for the companies, which led them to begin offering defined contribution models across all benefits.

As employers move to a defined contribution benefits model, employees will be faced with the task of deciding how to spend their benefit dollars. Research has shown that employees would allocate 75 percent of their benefits to health, dental and vision coverage, and 25 percent to other coverage, such as employee-paid life, disability, accident, or critical illness insurance. (Group Benefits and the Defined Contribution Model, 2013)

How can I set up a defined contribution health plan?

Moving to a defined contribution health care plan can be tricky, as companies have to comply with IRS requirements and a raft of other federal regulations, including the Health Insurance Portability and Accountability Act, the Affordable Care Act, and the Employees’ Retirement Income Security Act.

HIPAA logo

We at Peter Green Insurance take the time to stay abreast of the changes taking place in federal laws that relate to health care insurance. Our agents study the policies offered by a large variety of companies to present you with recommendations tailored to your business. We’ll explain the details, help your employees understand their options during enrollment, and be there as a resource for you throughout the year. We do the research and present you with a comprehensive package that meets your needs within your budget.

Give us a call today at 714-258.2800 or 888.725.7776 or click here  to visit our website.