Washington Post Looks at Debate Over ‘Defined Contribution’ Health Benefits
With the continuing "surg[e]" in health care costs, the "latest buzzwords" among employers are "defined contribution health benefits," which allow employers and/or employees to contribute a certain amount of money to workers' health insurance, the Washington Post reports. "[D]ifferent people mean different things" when speaking of defined contribution programs, according to the Post. Some refer to medical savings accounts, which allow contributions to a tax-free, interest-bearing account to cover "routine" medical expenses while offering a high-deductible policy for catastrophic illness. Others refer to "cafeteria" plans, under which employers offer several health plans and pay part of the premiums. Under such a system, employees can buy more expensive coverage than that offered by employers by paying additional premiums out of pocket or by using a "system of credits." A third definition of "defined contribution" is a system where employers let a number of insurers participate, "offering varying coverage at varying prices, with the employer picking up a fixed portion of the cost," the Post reports.
Opposition to Plans
The Post reports that there are "many worries" about defined contribution plans. For example, some say that defined contribution plans, like medical savings accounts, favor the "rich and healthy" and would leave only the "poor and sick" in the traditional insurance market, which could have trouble surviving such an imbalance. In addition, some employers "question" the idea of "shifting risk onto the employee." The Post reports that because of these doubts, "few" employers "seem ready to move beyond the existing [health insurance] system." Dallas Salisbury, president of the Employee Benefit Research Institute, said, "This is an area where there is a lot of talk and very little action" (Crenshaw, Washington Post, 8/27).
