Why Employers are Shifting to the Defined Contribution Health Model

Predictability and choice are driving a massive shift in how businesses offer health benefits.

The Death of the One-Size-Fits-All Plan

In a multi-generational workforce, a 25-year-old single employee and a 50-year-old employee with a family have vastly different healthcare needs. Traditional group plans force employers to guess what the "average" employee needs, often resulting in expensive plans that satisfy no one. The defined contribution model solves this by allowing employees to select the exact carrier, network, and deductible that fits their life.

Ultimate Budget Predictability

For CFOs and business owners, traditional group plan renewals are a nightmare of unpredictable rate hikes. With an ICHRA, the employer decides exactly what they want to spend per employee class per month. If premiums rise in the individual market, the employer's cost remains exactly the same unless they actively choose to increase their contribution allowance. This shifts the risk of premium inflation away from the business.

Risk De-risking

Because employees are purchasing individual ACA-compliant policies, the employer is no longer subject to the devastating impact of a single high-cost claimant blowing up their group renewal rates. The risk pool is transferred to the individual market, insulating the business.