The End of Employer-Provided Health Insurance: Why It's Good for You and Your Company

Chapter 13What Is Defined Contribution Healthcare?

If you are reading this book, you have probably come to the conclusion that employer-provided health insurance may no longer be the best solution for your company and its employees. Or, perhaps you are being forced to cancel your company's employer-provided health insurance plan due to cost. Look no further—there is a new and better way for your company to provide employee health benefits. It's called defined contribution healthcare. With this approach, instead of providing a one-size-fits-all employer-provided health insurance plan (a defined benefit), your company (1) allows each employee to purchase his or her own individual health insurance plan independent of the company, and (2) reimburses each employee for their cost up to a monthly healthcare allowance (or defined contribution) set by the company. While this concept has been around for many years, employers have been hesitant, until now, to make the switch primarily due to limitations in the individual market—limitations that no longer exist.

Due to the advantages of the improved individual health insurance market, your company should now terminate employer-provided health insurance in favor of defined contribution healthcare and individual health insurance. Doing so will allow your company to save up to $12,000 per employee per year, while offering a better employee health benefit program for recruiting and retention purposes. If you have 10 or more employees, that ...