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Small Business Employee Benefits and HR Blog

How 5 Companies Are Using Defined Contribution Health Plans

April 22, 2013
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Defined contribution health plans are often described as an affordable alternative to employer-sponsored group health insurance plans. But how do defined contribution health plans really work for companies? Zane Benefits has worked with companies of all shapes and sizes over the years. As a result, we've been given a unique glimpse into what challenges they most often face. Defined contribution health plans can help overcome the hurdles companies face like cost, minimum contribution, and participation requirements. These five defined contribution case studies from current Zane Benefits' clients demonstrate how defined contribution works for real companies and nonprofits.

case studies

Texas Pediatric Dental Office Starts Offering Benefits

For three years, Kids Dental in Texas researched employer healthcare plans and was unable to find a solution that was affordable and offered good coverage without a high deductible. Kids Dental wanted to offer a competitive health benefits plan that was affordable for both the company and 15+ employees. After learning about Defined Contribution, aka Health Reimbursement Arrangements (HRAs), Kids Dental starting providing a defined contribution health plan to employees. Kids Dental grants tax-deductible allowances to its employees for private health insurance and other medical costs. The employees use these funds tax-free and have the flexibility to create a health care solution that best fits their needs.

Colorado Delivery and Logistics Company Saves on Health Care Costs

The Feet, Inc., based in Colorado, depends on health benefits for recruiting and retaining top employees. When their group health plan exceeded internal budgets, The Feet needed a new health benefits solution that offered the same level of health care for its 30+ employees while remaining within budget. In September 2009, The Feet began offering a Defined Cobtribution ZaneHRA. The Feet now uses tax-deductible funds to grant monthly allowances to their staff for individual health insurance premiums and other medical costs.  Employees use these allowances tax-free, and have the flexibility of creating health care solutions that best fit their needs. 

For Recruitment and Retention, Oregon NonProfit Offers "Pure" Defined Contribution

SPOON Foundation, a non-profit for child nutrition located in Portland, Oregon, needed health benefits to promote recruitment and retention within their organization. As a small non-profit, SPOON needed a health care solution that was affordable, yet still offered competitive and flexible benefits for its valued employees. In March 2012, SPOON began offering their employees a Defined Contribution ZaneHRA plan. Employees now choose their own individual health plans and are reimbursed tax-free for insurance premiums and other eligible medical expenses. As the nonprofit grows, SPOON can increase benefits options without involving a group insurance provider.

Virginia Modular Home Manufacturer Saves 76% on Employee Health Benefits

Cardinal Homes is based in Wylliesburg, Virginia with 53 employees. To recruit and retain top employees, Cardinal Homes needs competitive health benefits. After years of increasing group health insurance costs, Cardinal Homes needed a new tax deductible solution for employee health benefits that gave employees a choice and allowed corporate control over health care expenses. In August 2007, Cardinal Homes began offering employees a Defined Contribution ZaneHRA plan. Cardinal Homes now provides its employees with a monthly “defined contribution” that employees choose how to spend. Employees may choose an individual health insurance plan (from any carrier) that best fits their family’s individual needs, and are reimbursed via their paycheck tax-free. Bottom line -- Cardinal Homes saved 76% on employee health benefits.

North Carolina Medical Imaging Technology Company Lowers Group Health Care Costs and Increases Benefits Options 

Heart Imaging Technologies is based in Durham, North Carolina with 9 employees. Heart IT had a high cost group health plan with low utilization among its employees. To continue keeping high employee retention, Heart IT looked to lower health care costs while increasing utilization among employees and dependents. In January 2012, Heart IT began offering employees a Defined Contribution ZaneHRA plan. Heart IT lowered group health plan costs by providing its employees with a monthly “defined contribution” that employees choose to spend. Employees use these tax-free funds towards family insurance premiums and other eligible medical expenses.

Read more real defined contribution health plan case studies here.

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