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Employment Resources


By August 1, 2012No Comments

The landmark Supreme Court decision upholding the federal Affordable Care Act (ACA) will encourage more employers to replace direct payment of their workers’ health care premiums under a company-sponsored plan with a lump sum that employees would use to buy the coverage of their choice.

A growing number of smaller and medium-sized businesses have been offering this “defined-contribution” option – similar to 401(k) programs financed by employers making a single tax-deferred payment into a retirement savings account – for years. An employee health benefit plan financed by a lump sum payment can save employers as much as 15%-25%, compared with the cost of a conventional benefit program; that’s a significant advantage, given that the average health care premium for covering workers and their families has skyrocketed by 113% during the past 10 years.

What’s more, defined-contribution plans shift the responsibility for selecting a plan from the business to individual employees, which frees them up to tailor a program to the providers and benefits they prefer, rather than being stuck with employer-controlled, one-size-fits-all coverage (employees can also retain their plan if they move to a new job).

The ACA will simplify employees’ health care choices by setting benchmarks for coverage and creating insurance exchanges on the state level that offer a variety of programs.

The act gives businesses a powerful incentive to offer workers the “choose-it-yourself” health care option by funding high-risk coverage pools in individual states for workers with previously existing medical conditions. As of January 1, 2014, all Health insurers will be required to guarantee coverage for every private-sector employee.

To learn how you, and your employees, can take advantage of these new programs, please get in touch with our employee benefits professionals.