Combat rising health plan expenses with a defined contribution plan
You’ve heard it before; the cost of group health plans are on the rise. You’ve probably experienced the effects of these cost increases within your own company. Here’s how a defined contribution health plan could help you regain control over your healthcare spend.
For decades, most employers have been approaching rising costs in one of two ways:
- To change the plan design by introducing higher deductibles, copays, or out of pocket maximums.
- To increase employee payroll deductions.
This may be an appropriate way to address cost increases of two to three percent, but it could cause serious issues when your plan see’s a cost increase of fifteen-plus percent as many have in recent years.
Let’s say this years health plan costs $500 per employee per month. You, the employer, are telling your employees that you are picking up 80 percent of that expense, leaving $100 per month for your employees.
Now, let’s say the cost of your plan increases by twenty percent to $600 per employee per month (PEPM) next year. The cost to you, the employer, would rise by that same twenty percent meaning next years plan would cost you $480.