Let’s face it—we’re all feeling the financial pressure of a broken health benefits system. Yep, we said it: broken. The affordability of employer-sponsored health coverage continues to drop significantly year after year. So, the ability to even address what employees need gets further and further out of reach. It’s not sustainable.
The benefits landscape is changing, employee needs are changing, and you need a different solution.
Costs Are Continuing to Rise
Take a look at the status quo of health benefit costs.
- Health benefit costs are jumping 5.4% to 8.5% in 2024—after more than a decade of annual cost increases typically averaging 3-4%.
- Most companies are experiencing 5.4% to 6.6% cost increases, depending on what they’ve done to change their plans already.
- And over 67% of employers plan to prioritize cost control over the next three years.
That’s a problem. It’s difficult to absorb rising costs without offloading some of the burden onto employees.
The rising costs of traditional group health plans can certainly impact a company’s financial bottom line. Premium increases eat into profits and limit resources that could be directed toward other benefits or important business activities. Moreover, when employees choose plans with broader coverage options than they need, it can result in unnecessary expenses for both the company and the employees themselves.
Employee Needs Are Changing
Are changing workforce patterns challenging you to redesign the benefits you offer? You’re not alone.
In a world where consumerism and technology are quickly changing the way people work and benefits are offered, employers are getting creative—seeking out solutions that resonate with their employees and meet talent management goals. That means finding solutions that meet employee demands for more choice and control of their benefits.
The COVID-19 pandemic took the remote work transition to warp speed—with many organizations retaining a remote or hybrid workforce. And that shift impacts health insurance carrier options and rates. One benefit network can’t meet the needs of employees working across multiple states and locations.
Moreover, there are five different generations active in the workforce for the first time ever. Each generation has unique needs and concerns they are looking to address with their benefits. That requires a multifaceted and complex approach.
With 51% of employees actively looking for new employment opportunities, employers are re-evaluating the effectiveness of the status quo and making a change.
Enter defined contribution plans.
A Better Solution: Defined Contribution Health Benefits
You care about your people, and you want to build a benefit program that meets the employee’s needs. It’s also probably fair to say that you want a predictable budget and easy ways to administer your health benefits. Defined contribution plans are solving those challenges for employers who’ve made the switch.
Defined contribution health plans help employers of any size gain financial control while increasing employee’s freedom of choice to select the health coverage that best meets their unique healthcare needs.
How do they work?
- Defined contribution plans are employer-funded, and employees get to choose the health insurance coverage they want.
- Employers set their health plan budgets annually and provide employees with a defined amount of money for their health insurance.
- Employees shop for and purchase their health coverage from a wide selection of options rather than one or two chosen by their employer.
- A defined contribution plan acts much like a traditional group health plan as it’s tax-advantaged and ACA-compliant.
- With Nexben’s solution you have the added benefit of payroll deduction—leaving the cumbersome process of reimbursement behind.
Defined contribution health plans take several forms, including an Individual Coverage Health Reimbursement Arrangement (ICHRA). Just remember to thoroughly evaluate the potential positives and negatives of any new benefits strategy to ensure that it aligns with your company’s goals and meets the needs of your diverse workforce.
Break the Status Quo of Health Benefits
For years, companies have gone along with the status quo in the health benefits arena. We’ve suffered through health insurance premiums growing out of control. We’ve compromised right-sizing coverage for employees while sacrificing efficiency and increasing unnecessary costs. But the labor flux and a broken system demand employers step up their game to differentiate themselves.
By allowing employees to select health insurance coverage that aligns with their individual needs and preferences, defined contribution plans aim to address the diverse demands of a multi-generational workforce. And they allow employees to engage directly with their benefits, making sure they have what they need—with your support.
Find out if a defined contribution approach is a good fit for you (in minutes). Click here and get a customized estimate.
If you want to dig into the details of defined contribution plans, check out the ICHRA Guide.