Providing health insurance benefits is key to employee retention, but rising costs and participation requirements make this a challenge for most small business owners. How do you save on health insurance?
There are many tips out there on how to save on health insurance such as combining a high-deducible plan with a health savings account (HSA), purchasing in co-operatives, starting a wellness program, offering flexible spending accounts (FSAs), etc.
However for many small businesses, these are only temporary fixes.
The best way to save on health insurance? Don't purchase health insurance for your employees. Cancel your group health insurance coverage and instead, contribute to health insurance allowances.
This approach is being called "Pure" Defined Contribution Health Benefits (see this simple overview for how it works).
Small businesses love this approach because it allows them to offer affordable health benefits without the cost or complication of group health insurance. And, employees love this approach because they can use their allowance to be reimbursed for any qualified personal health insurance plan they choose, and can access the federal tax subsidies if they're eligible.
How to Save on Health Insurance with "Pure" Defined Contribution
Out of all small business health insurance solutions out there, "Pure" Defined Contribution achieves the most controllable costs because:
You (the business) define your budget. You set any contribution amount to employees’ health care allowances. There are no minimum employer contribution amounts and no annual renewal increases or fees.
You decide which employees to offer the health benefits to by using employee classes. This allows you to focus resources on employees who are vital to the business.
You only reimburse employees for eligible premium expenses, up to the amount in their health care allowance. Any unused fund stays with your business.
Your health benefits dollars are stretched farther. Personal ("individual") health plans are much less expensive than group coverage. And eligible employees can access health insurance tax credits. That means a contribution of $200/month per employee goes much farther with "Pure" Defined Contribution than it does toward group health insurance premiums.