Defined Contribution Health Insurance
Table of Contents
"Employers are sick of being caught in the middle of an essentially political argument between doctors and health plans."
Employers currently see premiums rising again. They are nervous about the prospect of being held liable for bad outcomes. They worry that even a choice of several plans is no longer suitable for a diverse workforce. They are tired of the unpredictability of health care expenses and of the administrative costs associated with managing a benefits plan. And they are sick of being caught in the middle of an essentially political argument between doctors and health plans. They get few kudos for spending $4,000 to $6,000 per employee on health care, but they get a ton of grief if Viagra or in vitro fertilization isn't covered.
They are also concerned about increasing regulation, as the federal government follows the states in placing social policy on the backs of employers through mandated benefits and other regulations.22 This year's sensation is the "Patients' Bill of Rights." Before that came COBRA, HIPAA, mental health parity, mandates passed by Congress on hospital stays for childbirth and mastectomies and a slew of other proposed mandates. Every year there seems to be something new for corporate human resource administrators to comply with.
Employers want to stop being "the monkey in the middle." They want to get out of managing health benefits. At the same time, they want their workforce covered and productive. They know that having a good health plan reduces expenses for sick leave and can boost worker morale. The question is how to balance these two competing interests.
Increasingly, employers are looking at their pension benefits as a model. They have successfully moved their retirement programs from defined benefits to Defined Contribution programs like 401(k)s.23 Employees are happy to control their investments and shape their own futures. Employers are happy to have a fixed, budgetable obligation administered by professional money managers. They wonder whether they can apply the same approach to their health care obligations.