Extremely low cap on benefits allowed in a self-funded plan?

[jeanine]

Smaller employer wants to offer some type of health care coverage to employees, not to exceed $10,000 per enrollee per year. Employer also wishes to self-fund because of low participation rate which is making it difficult to secure insurance. Any opinions as to what is best in this situation? I'm thinking that this may be a good defined contribution case--he can just give them the money to buy their own coverage. I'm not sure what the tax ramifications would be though. Also, can you offer a self-funded health plan with this low of a level of coverage? Opinions or references to sites discussing this would be appreciated.

[KIP KRAUS]

I’m not sure about the defined contribution route. However, if an employer wants to provide a self-insured medical plan that provides a maximum annual benefit of $10,000 per employee and they don’t have a problem with discrimination I say there’s no reason why they couldn’t. Maybe just giving each employee a $10,000 FSA each year would work, again as long as such an arrangement doesn’t favor the Highly Compensated Employees, I don’t see what could stop them