If you run a business and you don't have a health plan for your employees, chances are that you may be having troubling attracting and retaining good people. Most employers would like to give their employees this option, however, most cringe at the extra expense to fund a health plan. The most important thing to realize when contemplating whether the business can afford to help out with health insurance expenses is this: As the employer starting a plan from scratch, you have complete control over what you spend!
In working with many small businesses looking to implement health insurance relief for their employees, I have come to a conclusion. The conclusion is this: employees appreciate any help you can give them, even if you don't pay for the entire cost of the plan. Now the question comes down to which route to take when designing a plan. There are two basic paths:
1. Traditional Group Plan
Or
2. Defined Contribution Plan
What is the difference between the two options?
Under a traditional group plan, the employer picks the plan design for all employees and agrees to pay a portion of the premiums, anywhere from 50% to 100%. Under a defined contribution plan, the employer gives each employee a fixed amount per year and it is up to the employees to choose their own individual health policies.
Why would a business choose a defined contribution plan?
There are a few reasons why some businesses prefer this choice. First, the employer knows exactly what his or her expenses are going to be each year. Under a traditional group plan, the employer is forced to pay a portion of the plans premium each year, even if rates jump 30%. Second, there won't be a jump in rates due to an individual claim in the group. In a traditional group plan, if you have a small group, your rates may jump dramatically from year to year if someone gets hurt or sick. To make matters worse, the rates jump for everyone in the group! With a defined contribution plan, the employees purchase individual policies where their rates won't jump due to an individual claim. Third, the employer is out of the health insurance business. It is up to the employees to shop around each year, not the owner. Last, it is often a better choice for the employee if they ever leave. Instead of going on COBRA coverage and after the COBRA period ends trying to find an individual policy, they will already own an individual policy that is fully portable.
Why would a business choose a traditional group plan?
Despite the advantages of a defined contribution plan, many employers still prefer a traditional group plan. First, it is typically simpler to administer. The employer writes one check each month. Second, it is more equitable for older employees. If a younger employee and an older employee each get the same amount to use toward their health premiums, the younger employee will be able to buy a better plan due to the lesser premiums for the same plan as the older employee. Third, some employers don't trust their employees to be responsible enough to purchase health coverage (sometimes your business may be referred to as adult daycare). The employer figures that if they pay the check, the irresponsible employee will be covered. Last, there are many more plan options available in the group arena regarding co-pays than on the individual side.
What design would be best for my company?
There is not a one size fits all answer. It depends largely on the factors discussed above such as the budget, employee ages, and degree of simplicity desired as well as other factors not even mentioned. Your best bet is to find a competent broker who will help you evaluate your company's situation and walk you through the general options available.
Source: EzineArticles.com/?expert=Matthew_Engelmann
In working with many small businesses looking to implement health insurance relief for their employees, I have come to a conclusion. The conclusion is this: employees appreciate any help you can give them, even if you don't pay for the entire cost of the plan. Now the question comes down to which route to take when designing a plan. There are two basic paths:
1. Traditional Group Plan
Or
2. Defined Contribution Plan
What is the difference between the two options?
Under a traditional group plan, the employer picks the plan design for all employees and agrees to pay a portion of the premiums, anywhere from 50% to 100%. Under a defined contribution plan, the employer gives each employee a fixed amount per year and it is up to the employees to choose their own individual health policies.
Why would a business choose a defined contribution plan?
There are a few reasons why some businesses prefer this choice. First, the employer knows exactly what his or her expenses are going to be each year. Under a traditional group plan, the employer is forced to pay a portion of the plans premium each year, even if rates jump 30%. Second, there won't be a jump in rates due to an individual claim in the group. In a traditional group plan, if you have a small group, your rates may jump dramatically from year to year if someone gets hurt or sick. To make matters worse, the rates jump for everyone in the group! With a defined contribution plan, the employees purchase individual policies where their rates won't jump due to an individual claim. Third, the employer is out of the health insurance business. It is up to the employees to shop around each year, not the owner. Last, it is often a better choice for the employee if they ever leave. Instead of going on COBRA coverage and after the COBRA period ends trying to find an individual policy, they will already own an individual policy that is fully portable.
Why would a business choose a traditional group plan?
Despite the advantages of a defined contribution plan, many employers still prefer a traditional group plan. First, it is typically simpler to administer. The employer writes one check each month. Second, it is more equitable for older employees. If a younger employee and an older employee each get the same amount to use toward their health premiums, the younger employee will be able to buy a better plan due to the lesser premiums for the same plan as the older employee. Third, some employers don't trust their employees to be responsible enough to purchase health coverage (sometimes your business may be referred to as adult daycare). The employer figures that if they pay the check, the irresponsible employee will be covered. Last, there are many more plan options available in the group arena regarding co-pays than on the individual side.
What design would be best for my company?
There is not a one size fits all answer. It depends largely on the factors discussed above such as the budget, employee ages, and degree of simplicity desired as well as other factors not even mentioned. Your best bet is to find a competent broker who will help you evaluate your company's situation and walk you through the general options available.
Source: EzineArticles.com/?expert=Matthew_Engelmann
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