Should we contribute a fixed dollar amount or a percentage of premium?

Both methods can work. The right choice depends on your priorities. Percentage-based contributions help keep premiums affordable for employees, while fixed-dollar contributions give employers more predictable costs. Many organizations use a hybrid approach to balance both.

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Percentage-Based Contributions: Predictable for Employees
Contributing a fixed percentage, such as 75 percent employer and 25 percent employee, helps maintain affordability even when premiums increase.

Pros:

• Keeps employees’ share of costs predictable.
• Maintains plan competitiveness over time.
• Makes it easier to meet ACA affordability standards for lower-wage workers.

Cons:

• Employer costs increase as premiums rise.
• Total spending can fluctuate year to year.
  Best for: Employers focused on employee affordability who can manage moderate annual cost changes.

Fixed-Dollar Contributions: Predictable for Employers
Paying a set dollar amount per employee, such as $400 per month, keeps total costs stable regardless of premium changes.

Pros:

• Simplifies budgeting and long-term financial planning.
• Works well across multiple plan tiers or with ICHRA models.

Cons:

• As premiums increase, employees pay more.
• May reduce affordability if not reviewed annually.

Best for: Employers that prioritize budget control or offer varied plan types such as MEC plus buy-up options or ICHRAs.

Hybrid Strategies: Combining Both Strengths
Many employers blend these models to achieve balance. For example, an employer might contribute 80 percent of employee-only premiums up to a $400 cap, with employees covering the remaining amount.

This approach supports fairness, maintains ACA affordability, and keeps employer costs predictable.

Review Your Strategy Annually
Whichever model you choose, revisit it each year to confirm that:

• It meets ACA affordability limits (8.39 percent of employee income for 2024).
• It remains competitive within your industry.
• It aligns with your workforce’s financial needs and overall budget.

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Vitable supports both contribution models by keeping overall healthcare costs predictable and utilization high. Every member receives $0 primary care, mental health, and prescription access, helping employers control costs without reducing real value for employees.

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• Percentage-based: Prioritizes employee affordability but offers less predictability for employers.
• Fixed-dollar: Prioritizes employer predictability but requires regular affordability reviews.
• Hybrid: Balances both priorities effectively.

Pairing your contribution strategy with Vitable’s flat-rate, $0 primary care helps manage long-term costs while ensuring employees have access to meaningful, affordable care.