Note: None of this should be taken as legal or tax advice.
Now that 2012 has become reality, figuring out employee health benefits can be a daunting task for both employers and employees.
With looming changes from health care reform and increased cost-shifting to employees,
defined contribution health benefits have emerged as the health benefit program of the future. According to leading experts,
2012 promises to be a huge year for defined contribution health benefits. That means any employer or employee considering health benefits in 2012 needs to consider the following.
In a
recent survey, McKinsey & Company spoke to a number of employers regarding major trends they see for 2012 and beyond. The following is a summary of those trends to help employers plan their health benefits strategy:
1) Cost-shifting brings companies closer to defined contribution health benefits
2) Health care reform encourages defined contribution health benefits
Health care reform, coupled with rising costs, has employers of all sizes concerned. According to McKinsey & Company, up to 60% of educated employers plan to "definitely" or "probably" pursue alternatives to offering health insurance such as:
- Dropping employer-sponsored coverage,
- Offering employee health benefits using a defined contribution model, or
- Offering health benefits only to certain employees.
Many carriers have added defined contribution health benefit programs to their product offerings, confirmation that defined contribution has become an increasingly important component of health benefit programs.
3) Technology and education are a big part of defined contribution health benefits
One of the primary changes to the health benefits landscape is the move toward more electronic communication, which means that employees will be required to educate themselves and enroll in their own health insurance plans.
Private health exchanges and individual health insurance quoting/enrollment technology are expected to be a large component of defined contribution health benefits.
With
less than 25% of small businesses expected to offer group health insurance by 2014, have you explored all possible alternatives?
Extend Health Inc., a health exchange company, hopes to raise around $75 million with an initial public offering (IPO) of stock, according to a registration statement filed with the U.S. Securities and Exchange Commission.
The company runs the ExtendRetiree program, a private health exchange that helps employers switch retirees from traditional group retiree health plans into individual Medicare Advantage, Medicare supplement and Medicare Part D prescription drug plans.
Instead of paying paying the full cost of the new individual Medicare coverage, or a fixed percentage of the cost, the employer pays a set amount for each retiree who switches, the company says. The platform makes use of defined contribution health plans and health reimbursement arrangements. Click here to read the press release.
Defined Contribution and Private Health Exchanges Enable Client Retention
Park City, UT. December 12, 2011
Small employers are increasingly canceling group health benefits for 2012.
Zane Benefits, Inc. (http://www.ZaneBenefits.com) is partnering with local brokers to offer these clients
defined contribution solutions with new private health exchange technology.
Approximately 50% of U.S. small businesses with less than 50 employees do not offer group health insurance to their employees. This figure is expected to greatly increase in 2012 due to:
1. Employer Contribution Requirements – Insurance companies require a minimum percentage of the premium for each employee that must be paid by the employer, or the entire plan is cancelled;
2. Employee Participation Requirements – Insurance companies require a minimum percentage of employees join the group plan, or the entire plan is cancelled; and
3. Cost per Participant – Group health plans for 2012 are facing the greatest increase in the history of U.S. health benefits, due to increasing health care costs and new coverage requirements imposed by ACA (Health Care Reform).
Zane’s technology platform directly addresses each of these issues.
Click here to read the full press release.
Note: this should not be taken as tax or legal advice.
- 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
"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?
