NCPA - National Center for Policy Analysis

Companies Turn Health Care Decisions Over To Employees

February 8, 2000

Business owners and managers are reportedly concluding that their employees should be put in charge of their own health insurance destinies. Give employees the money that their employers have been paying into health care plans, the theory goes, and let them choose the program they deem best for themselves.

So far, few companies have put the concept into practice, but it does offer a substantial number of benefits -- for businesses and workers, and perhaps for the nation as a whole

  • Employees would suddenly have a wide range of choices and could select the insurance plan best suited to their individual health needs -- even having the option to buy more generous coverage and pay the difference between the allotted benefit and enhanced coverage themselves.
  • Companies could escape from the business of being health-care administrators and also avoid legal liability in cases of malpractice -- a specter which is beginning to haunt some.
  • As consumers making decisions affecting their own pocketbooks, employees could become a factor in holding down increases in health-care costs.
  • To counter the argument that workers lack the information necessary to make informed choices between differing and complex plans, the few companies which have adopted this strategy have assisted by compiling data comparing available plans.

Xerox Corp. has already adopted this strategy -- even allowing employees who fail to spend their entire allowance to apply the remainder to a related benefit, such as disability or dental insurance. Companies which allow choice have observed that when a particular plan raises its rates significantly, employees enrolled in that plan have not hesitated to take their business elsewhere.

Source: Ron Winslow and Carol Gentry, "Health-Benefits Trend: Give Workers Money, Let Them Buy A Plan," Wall Street Journal, February 8, 2000.


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