NCPA - National Center for Policy Analysis

Health Benefit Changes Will Follow Pensions

December 4, 2000

As pensions go, so too will health benefits go, says Greg Scandlen in a recent report for the National Center for Policy Analysis. Employers have shifted from defined benefit pensions that give employees a set amount of retirement income based on years of service to defined contribution plans that are portable and allow employees to benefit from stock market investments. Health benefits are likely to follow, provided hurdles in current federal law can be overcome.

Defined contribution health insurance can be a "win/win" for both employers and employees.

  • Employers can get out from under the regulatory and administrative burdens of managing benefit programs.
  • Employees will benefit from increased choice, flexibility and portability.

One hurdle for defined contribution health plans is the 1996 Health Insurance Portability and Accountability Act, says Scandlen. Despite its name, HIPAA does not deal with portability at all. "It does not provide for individual plan ownership, or allow workers to keep their coverage when they change jobs," says Scandlen.

In order to retain the tax advantages now given employer-sponsored defined benefit plans, legislation is required to put defined contribution health plans on a level playing field, says Scandlen.

Source: "Job-Based Health Benefits Likely to Shift to Defined Contribution Model, Report Says," BNA's Health Care Policy Report, December 4, 2000.

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