Defined Contribution Health Care - The Future of Health Benefits?

Note: this should not be taken as tax or legal advice.

This week, Peter Orszag, a former director of the Office of Management and Budget in the Obama administration, wrote an article on Defined Contribution Health Care. In the article entitled, "Defined Contributions Define Health-Care Future: Peter Orszag", Mr. Orszag makes the following arguments:

The health benefit market is currently dominated by “defined-benefit” health plans that will shift to "defined contribution" health plans similar to 401(k)s
The primary driver of this shift is U.S. Employers need to limit exposure to health-care costs
The Health Reform law will accelerate the shift

In the article, Orszag also takes a shot at McKinsey for its infamous 2011 survey that predicted Up to 60% of Employers Will Drop Traditional Group Health Insurance Coverage In 2014:

"A misleading survey by McKinsey & Co. has suggested the potential for huge declines in employer-based health insurance. But projections from the Congressional Budget Office and other respected researchers generally point to only a modest net decrease."

In a single sentence, Orszag calls McKinsey & Co. "misleading" for suggesting a decline in employer-sponsored health insurance and the Congressional Budget Office "respected researchers" for suggesting the opposite.

Did we mention Peter Orszag was a former director of the Office of Management and Budget?

Click here to to read the full article.

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Posted by Rick Lindquist

Tags: Insurance, Reform, Section 105, defined contribution, Defined Contribution Health Plan, Defined Contribution Health Care

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Tuesday, July 12th, 2011

Finally, an Affordable "401(k)" Program for Health Benefits

In the 1970s many U.S. employers were statistically bankrupt due to the expected cost of the defined benefit retirement programs. Starting in the 1980s, employers switched to affordable "defined contribution" (vs. defined benefit) retirement programs which today cover more than 100 million Americans.

A similar change is taking place in employee health benefits due rising health insurance costs and the 2010-2014 implementation of U.S. Health Care Reform.

Zane Benefits announced today a new affordable health benefits program for small to mid-size employers. With Zane Benefits’ “401k for Health Benefits”:

(1) Employees use pre-tax salary withholding to pay for affordable personal health policies that employees purchase independent of their employer; and

(2) Employers can choose to optionally contribute tax-free employer funds for certain employees to reimburse a portion of their personal health insurance premium.

Best of all, with Zane Benefits "401k for Health Benefits" the entire program is administered through the employer's payroll system in less than five minutes of administration time per month.

"This is the solution all small employers have been waiting for," says Professor Paul Zane Pilzer, the founder of Zane Benefits. "It is especially relevant today now that Health Care Reform has made it so much easier for employee's to purchase their own personal health insurance independent of any preexisting medical conditions." Since 2010, insurance carriers are no longer allowed to reject applicants for personal health policies under age 18 with preexisting medical conditions, and this mandate is being extended to all U.S. citizens between now and 2014.

According to a recent study by Kaiser Family Foundation, approximately 2 million U.S. small employers with less than 20 employees do not offer group health insurance due to the cost, participation requirements and administration hassles associated with traditional group health insurance. That’s because in order to offer group health insurance, small employers must meet special minimum requirements set by the insurance company that typically include:

Minimum Employer Contribution Requirements - Most insurance companies require small employers to contribute a minimum dollar amount, ranging from 50 percent to 75 percent of the premium. If an employer cannot afford the minimum contribution, the insurance company will not provide health insurance to the employer.

Minimum Participation Requirements - Health insurance companies typically require small employers to meet minimum participation requirements. If the required number of employees does not participate in the health insurance plan, the plan will be cancelled.

Administrative Time - Group health insurance plans require employers to invest time and resources into the administration and management of the health plan. If the administrative costs are restrictive, the employer may choose to not offer health benefits.

Click here to read the full press release.

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Posted by Rick Lindquist

Tags: Insurance, individual health insurance, defined contribution, 401k, Defined Contribution Health Plan

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Clarifying Health is a blog about health insurance, health benefits, and everything else related to how Americans pay for medical expenses.

If you have any tips or suggestions for this blog, send an email to blog@ZaneBenefits.com and let us know. We always appreciate feedback

We also run a company called Zane Benefits where we're doing everything we can to help America out of the current healthcare mess.

If you want to learn more about how Zane Benefits helps companies with their benefits, or you're interested in working with us, visit the Zane Benefits website.

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Defined Contribution Health Care - The Future of Health Benefits?

Finally, an Affordable "401(k)" Program for Health Benefits