Compared to offer traditional coverage group health employers using a defined contribution solution save an average of 57 percent on comparable comprehensive health benefits. This is according to a new annual report Zane Benefits. In this article, we will examine the cost effectiveness of health services for defined contribution and highlight the main trends in costs and the use of the study
Note -. To download the full study, "The employer-financed individual annual report on health insurance in 2016," click here.
Profitability of defined contribution
In this article, the defined contribution means a formal plan of health benefits used to reimburse employees for individual health insurance premiums purchased. This model is commonly referred to defined contribution individual health insurance financed by the employer or the premium payment. in Learn more about how the defined contribution works here
One reason so many small businesses adopt health benefit contribution is the inherent cost-effectiveness
with defined contribution :. .
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the employer determines the amounts of the allowance; no amount of minimum or maximum contributions This not only allows employers to control costs, but. gives them the opportunity to adjust allocations according to needs and expectations of each employee.
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The employer may provide different benefits for different categories of employees, as long as the differences are based on bona fide job criteria.
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at the end of the plan year, the amounts of unused allocations remain with the employer.
Average allocations defined contribution
As defined in the report, an allocation is in favor of the real dollar available to employees on a monthly or annual basis. The amounts may vary depending on employee category or size of the family, as determined by the employer, and represent a fixed maximum annual liability. If employees do not fully utilize their allocation during the plan year, unused funds remain with the employer.
The annual report of Zane Benefits, the average allocation is offered to employees nationwide $ 426 per month. As shown in the table below, the average allocation vary according to marital status, region and state
Tip -. For medium allocations by state, download the full report here.
average Defined contribution utilization and costs
once established, an allowance provided by the employer is the maximum, the responsibility of annual expenditure for the benefit of health the company. However, the actual expenditure is based on the use of quotas by the participants.
For example, if an employee has an allowance of $ 400 per month and approved premium is $ 300 a month, she paid $ 300 a month (a utilization rate of 75 percent). Conversely, if the same employee an allowance of $ 400 per month and approved premium is $ 450 per month, it is reimbursed $ 400 per month (100 percent utilization).
In the first example, the $ 100 unused dollars remain with the company, reducing the overall cost to provide health benefits to the employee. . In the second example, the employee uses all its allocation and the remaining $ 50 is the monthly responsibility
Nationally, the average amount approved ( "Redemption Amount") between all states including all sizes of family is $ 380 - a rate of 89 percent of use.
Given this average, employers with ten employees has a maximum annual expenditure of $ 400 x 10 x 12 months = employees $ 48,000. Applying the 89 percent utilization rate provides an actual annual expenditure of $ 380 x 10 x 12 months = employees $ 45,0
Tip - .. For the average utilization rates by State and industry, download the full report here
defined contribution vs. Traditional insurance group
Finally, the report finds employers using defined contribution realize cost savings of 57 percent on average compared to the cost of group health insurance means.
The comparative value of a solution of defined contribution health benefits varies by employer and region. The map below provides a visual comparison of average savings by the state. The data takes into account the average employer-funded amounts for reimbursement by the state as well as the average group health insurance costs by state (as reported by Kaiser / hRet, 2015).
Tip - for the state by state comparison of cost details, download the full report here
Conclusion
plans defined contribution plans provide significant value to employers and facilitate employee access to coverage and quality of the benefits of. market in modern individual health insurance. According to the new report, employers who use the software Zane Benefits realize average savings of 57 percent, compared to the costs of providing a traditional group health insurance.
improvesThis greatly saves the ability to pay and, in many cases, improve their offer benefits. Ultimately, improving the ability of small businesses to recruit, retain and competition for qualified human resources.
Do you have questions about the cost savings of defined contribution? Download the full report here or leave a question below.
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