Is health insurance for your team elusive? There might be an answer
Reprinted with permission from Zane Benefits
As small business health insurance costs continue to rise, employers are looking for ways to offer health benefits at a lower cost. One of these strategies being adopted by dental practices is defined contribution health care.
Overview of small business health insurance
Small business health insurance plans are a form of employer-sponsored health coverage. Costs are typically shared between employer and employee, and coverage may also be extended to dependents. In certain states, self-employed persons without other employees may qualify for group health insurance plans. There are several different types of small business health insurance plans available.
However, many small businesses can’t offer small business health insurance coverage due to rising costs, and restrictive minimum contribution and participation requirements. This is why many small businesses are transitioning to a defined contribution strategy.
Overview of defined contribution
A defined contribution health plan allows any employer to name its price for health benefits. Rather than paying the costs to provide a specific small business health plan (a "defined benefit"), employers instead fix their costs by establishing a monthly dollar amount (a “defined contribution”) that employees may spend on qualified health insurance.
With the purest form of defined contribution, employers offer employees a health insurance allowance as the benefits package. Employees purchase an individual policy of their choice, often with the help of a health insurance broker, and are reimbursed as the plan allows.
Why defined contribution is popular with dental practices
Defined contribution is becoming popular with dental practices because it is flexible and affordable. Here's a look at the benefits of defined contribution, and why they fit well with dental practices.
1. Controllable costs – The dental practice sets and fixes all costs because they decide how much to contribute. There are no minimum contribution requirements, and the practice can vary employee contributions based on job criteria.
2. More time for serving patients – Offering defined contribution takes less than five minutes per month. Administering the benefit becomes a payroll function and requires minimal involvement from staff. There are no annual renewals, and employees maintain the direct relationship with the insurance company. Many dental practices are adopting lean operational philosophies, and defined contribution aligns with lean goals.
For employees of dental practices, defined contribution works well because of:
1. Lower costs – In today's workforce it's not just the employer who pays part of the premium cost -- it's employees too (especially for family coverage). Individual health plans costs 20-30% less than traditional group plans and new tax credits are available to qualifying employees to lower their out-of-pocket costs even more.
2. Choice of plan – With their defined contribution allowance, each employee may choose the health plan that best fits his or her personal needs. This can be a plan from any insurance carrier and any type of plan coverage (deductibles, network, etc.). Employees can keep their doctor and preferred medical providers. The plan is portable and theirs to keep if they leave the practice.
3. Familiarity with health insurance – Clinical and administrative staff are often already comfortable working directly with insurance companies, and more familiar with health insurance terms than in other non-medical industries.
Four simple steps to help you start offering defined contribution health benefits
Step 1 – Set a date to terminate your group health plan
Step 2 – Define any amount the practice can afford
Step 3 – Select an insurance professional of your choice to help each employee find the right policy
Step 4 – Use online administration software to reimburse employees
Christina Merhar is alead contributor to Zane Benefits' Employee Health Benefits and Insurance Blog.
