Small Business Defined-Contribution Health Plans
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.
What Are Defined-Contribution Plans?
Defined contribution health plans are an affordable alternative to employer-sponsored group health insurance plans. The general concept of a defined contribution health plan is that a company gives each employee a fixed dollar amount (a “defined contribution”) that the employees choose how to spend. Typically, employees are allowed to use their defined contribution to reimburse themselves for individual health insurance costs. Rather than paying the costs to provide a specific group health plan benefit (a “defined benefit”), employers can fix their costs on a monthly basis by establishing a defined contribution health plan.