Finally, an Affordable "401(k)" Program for Health Benefits

In the 1970s many U.S. employers were statistically bankrupt due to the expected cost of the defined benefit retirement programs. Starting in the 1980s, employers switched to affordable "defined contribution" (vs. defined benefit) retirement programs which today cover more than 100 million Americans.

A similar change is taking place in employee health benefits due rising health insurance costs and the 2010-2014 implementation of U.S. Health Care Reform.

Zane Benefits announced today a new affordable health benefits program for small to mid-size employers. With Zane Benefits’ “401k for Health Benefits”:

(1) Employees use pre-tax salary withholding to pay for affordable personal health policies that employees purchase independent of their employer; and

(2) Employers can choose to optionally contribute tax-free employer funds for certain employees to reimburse a portion of their personal health insurance premium.

Best of all, with Zane Benefits "401k for Health Benefits" the entire program is administered through the employer's payroll system in less than five minutes of administration time per month.

"This is the solution all small employers have been waiting for," says Professor Paul Zane Pilzer, the founder of Zane Benefits. "It is especially relevant today now that Health Care Reform has made it so much easier for employee's to purchase their own personal health insurance independent of any preexisting medical conditions." Since 2010, insurance carriers are no longer allowed to reject applicants for personal health policies under age 18 with preexisting medical conditions, and this mandate is being extended to all U.S. citizens between now and 2014.

According to a recent study by Kaiser Family Foundation, approximately 2 million U.S. small employers with less than 20 employees do not offer group health insurance due to the cost, participation requirements and administration hassles associated with traditional group health insurance.   That’s because in order to offer group health insurance, small employers must meet special minimum requirements set by the insurance company that typically include:

Minimum Employer Contribution Requirements - Most insurance companies require small employers to contribute a minimum dollar amount, ranging from 50 percent to 75 percent of the premium.   If an employer cannot afford the minimum contribution, the insurance company will not provide health insurance to the employer.

Minimum Participation Requirements - Health insurance companies typically require small employers to meet minimum participation requirements. If the required number of employees does not participate in the health insurance plan, the plan will be cancelled.

Administrative Time - Group health insurance plans require employers to invest time and resources into the administration and management of the health plan.  If the administrative costs are restrictive, the employer may choose to not offer health benefits.

Zane’s “401K for Health Benefits” directly addresses each of these issues.  With the Zane platform, there are no minimum participation requirements that a company must meet in order to offer the plan, and there is no minimum employer contribution required. Instead, employees manage their own health care spending the way they manage their 401(k) retirement accounts.  Rather than pay the costs to provide a specific group health plan (a "defined benefit"), employers instead fix their costs by establishing a monthly tax-free dollar amount (a “defined contribution”) that employees choose how to spend.  In other words, the small employer gets to name its price.

Similar to a 401(k) retirement plan, the 401k health benefits program must include all legal documentation to ensure compliance with applicable regulations.  The Zane platform in an IRS, ERISA, and HIPAA-compliant platform that includes electronic plan document creation and employee election processes.

What makes the Zane program unique is that once an employer establishes the defined contribution plan, the employer has no further involvement in the employees’ health insurance decisions.   The employer’s role is limited to reimbursing employees through their existing payroll, which typically takes less than 3-5 minutes per month.

One of the more exciting features of the Zane platform is its seamless integration and compliance with up-and-coming health reform ideas.  There will be massive financial incentive in the upcoming years for employers to switch to defined contribution platforms, and Zane Benefits is at the forefront of providing this solution.