Recently we were contacted by a prevailing wage contractor (here in California) obligated to provide medical insurance benefits for all employees working 20 hours per week or more. The employer’s problem – the 20 hour per week employee was charged to the medical plan like a full time 40 hour per week employee. The part-time employee worked fewer hours, generating less revenue for the business, but their health insurance benefits were as just expensive as their full-time co-workers. Clearly, that doesn’t work.

This is a perfect example of why health insurance trusts (also known as a medical trusts) were created – to help employers manage the costs of providing health insurance benefits to their employees.  Medical benefit trusts help, in large part, by offering hour banks for the employer’s medical benefits contributions. Briefly, an hour bank is a bona-fide means of paying health insurance benefits by allowing employers to contribute equally for all employees on a dollar-per-hour-worked basis. (for a more detailed explanation, check-out our FAQ on Hour Banks)

When the employee has accumulated enough money in their hour bank, they can then use those funds (their money!) to join the employer’s health plan. That’s it. With the help of the health insurance trust, the employer is now only obligated to pay for employee health benefits in proportion to the number of hours that the employee actually works.