Health Insurance Class - Lesson #17 - Defined Contribution Plans Overview
Rather than paying the costs to provide large and expensive group health plan benefits, employers are now controlling their costs on a monthly basis by establishing a Defined Contribution Health Plan.
What a Defined Contribution Health Plan is that a company gives each employee a fixed dollar amount (a "Defined Contribution") that the employees themselves choose how to spend. Usually employees are allowed to use their Defined Contribution allowance to reimburse themselves for individual health insurance costs.
Defined Contribution Health Plans are a cheaper and more affordable alternative to more expensive employer-sponsored group health insurance plans. Defined Contribution Health Plans by themselves are not health insurance plans.
Defined Contribution Health Plans are programs that allow employees to be more involved and have more freedom in their healthcare choices. With a Defined Contribution Health Plan, employees will use their own finances to get their own healthcare plans.