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Small Business Employee Benefits and HR Blog

Defined Contribution Health Care - The Future of Health Benefits?

A Shift to Defined Contribution

This week, Peter Orszag, a former director of the Office of Management anddb dc resized 600 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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