Regardless of the politics surrounding The Affordable Care Act, healthcare reform has brought a lot of attention to opportunities for employers to better serve the needs of their employees. It may be difficult to identify what opportunity is the best fit for you, but Sonus Benefits aims to give you the guidance you need to make an informed decision. We’d like to shed some light on Defined Contribution, one of the features available to employers who are opting to enroll in private exchanges as a means of providing health care for their employees. Let’s investigate the basic framework of a private exchange and whether or not Defined Contribution is the best choice for your team.
What’s a private exchange?
It’s an online marketplace for buying health insurance and other related products. Unlike a public exchange, which is owned by the government, private exchanges are owned by a private- sector company or non-profit. Just think of it like shopping online for your groceries, but instead, you’re selecting the health coverage options that best suit your lifestyle.
Still wondering what private exchanges are all about?
Give this blog post a read. It gets much more specific about the public and private exchange options that are available for you.
What is Defined Contribution?
It’s kind of like an allowance, but for insurance. An employer sets an amount of money to be given to employee each month (or year) and the employee spends that money to custom create a health benefits plan according to their personal preferences. The employer can establish rules surrounding how that money can be used, but in general, where that money gets utilized within the private exchange is up to the employee.
Can I have an example?
Absolutely! Let’s say an employer gives each employee $350 a month for health insurance. The employer can decide that $300 of those dollars should be spent on health insurance and the remaining $50 can be spent on other benefits options like disability insurance, dental insurance, life insurance, or vision insurance.
The employee then heads to the online private exchange and decide what sort of combination of coverage best matches their needs. It becomes the choice of the employee, for example, whether they’d like a high deductible or low deductible. The end result is completely personalized health care coverage.
That’s a lot of responsibility!
That’s one way to look at it, but no employee will have to navigate creating a customized plan alone. There are advisors, like the fine people at Sonus Benefits, who are available to help coach employees through their decisions and find what will really work best for them.
What if, as an employer, I still want to offer 100% coverage for something?
You absolutely still can. Defined Contribution give employers increased control over their benefits plan. You can decide how you’d like to spend your money and where.
What are the benefits of Defined Contribution?
It eliminates the pain that comes from trying to force a one-size-fits-all solution on a group of people. Everyone has unique needs and Defined Contribution puts control in the hands of the people who know those needs best, individuals.
Employers will see increased control over the administrative burdens of providing health coverage. There are no more surprise increases in rates or decreased range of coverage. Employees will experience greater freedom to maximize the impact of their benefits plan.
Overall, you’ll notice increased satisfaction with insurance options for both employees and employers.
Where do I sign up or learn more?
You can visit our private exchange portal on our website and watch informational videos about Defined Contribution and whether or not it is the right option for you.