More employers changing to defined contribution plans for health insurance

[eridani]

http://articles.chicagotribune.com/2012-07-03/business/ct-biz-0703-corp-exchanges--20120703_1_health-care-health-insurance-deloitte-center

Many employers are quietly considering a move away from traditional defined benefit plans and toward defined contribution plans, which set aside a fixed amount of money each year for employees to use toward health care costs.

Under the structure of defined contribution plans, companies hand an employee a set amount--say $9,000--and employees use that money to buy or help pay for a health insurance plan they choose themselves.

At the heart of the shift is a desire of companies to reduce their exposure to health care costs by shifting the risk of unpredictable expenses to their workers.

Few employers, particularly large companies, are eager to discuss their internal deliberations on the issue because they don't want to raise concerns among employees before final decisions are made, said Paul Keckley, executive director of the Deloitte Center for Health Solutions, the health care research arm of consulting firm Deloitte LLP.

"The only thing that's certain right now is (companies are) doing everything that's legal to shift cost to employees," Keckley said.

Comment by Don McCanne: Just as they did with employee pension plans, employers are now gearing up to convert employee health benefit programs from defined benefit to defined contribution. What does that mean?

Over the past few decades, employers passed on the risks of their pension plans to their employees by switching from a defined benefit (a guaranteed dollar amount that employees would receive monthly in retirement) to a defined contribution such as 401(k) plans (a set dollar amount contributed to the pension account, but with no guarantee of the amount received in retirement - the employee thus bearing the full risk of the uncertain investment returns on the pension funds).

Now many employers plan to do the same with their health benefit programs. They intend to pay a set dollar amount for the premiums, whereas the employees will have to bear the the costs of health care inflation plus the costs of any benefits in excess of the basic program to be offered by the employer.

This will be disastrous. Employees are already being stuck with higher deductibles in order to slow the rate of premium increases for the employer. With defined contribution, premiums can be contained further by limiting the benefits covered, by further increasing the out-of-pocket cost sharing of deductibles, copayments and coinsurance, by tiering cost sharing of different levels of products and services, and by further restricting the panels of approved health professionals and institutions.


My comment: This is exactly what Paul Ryan wants to do to Medicare. An excellent way to get better at bankrupting and killing off sick people than we already are.

[HiPointDem]

1. well, this will be a good thing, as people won't feel the same need to stick with shit jobs for the

health benefits when they can get the same shit benefits at any other shit job.

[Honeycombe8]

4. Not really. You're still dependent on the $ to buy health care. You can't leave...

and do without that $. It's not salary or wages. It's pre-tax designated for health care only.

[HiPointDem]

11. my tongue was in my cheek

[Honeycombe8]

13. Ohhhhhh. Phew. nt

[PoliticAverse]

2. Another example of why health insurance shouldn't be tied to a specific employer. n/t

[NNN0LHI]

3. This is what it looks like when our wages and benefits are patterned after scab wages and benefits

Wages and benefits used to be patterned after union workers but a lot of Americans didn't like that system and they ran out and supported scabs over union workers.

This is the logical conclusion of that.

Don

[Honeycombe8]

6. There used to be no dental ins. at all. And people didn't use health ins. much...

health ins. in my younger days did not pay for maternity health care costs, male impotence costs, annual checkups, birth control even when used for a medical condition, etc. People also didn't go to the dr. as often as they seem to now.

Every time you make the ins. co. cover something, like maternity costs, premiums go up, they pay health care providers less, who in turn raise their rates. Simultaneously, since you have broader coverage, more people go to the dr more often. So the cost of health ins. goes up.

I saw this happen with dental care. The cost of dental care was reasonable. Everyone paid out of pocket. There was no dental ins. I then noticed that the cost of dental care starting skyrocketing. Then I realized that a lot of people were starting to use dental ins. The irony is that...the more people used insurance, the more expensive the care got, and the more you HAD to get dental ins. to afford the higher rates CAUSED by the dental ins.

It's a catch-22.

If we go back to the old days, there would be no dental ins. No maternity benefits. No birth control coverage. No ins. for regular checkups (only for medical problems). That would make the cost of ins. less. And it would be easier to find the same ins. at all employers, and able to change your job more easily and keep ins.

But those days are gone. Now we have much better, much broader, and very expensive health care costs.

[meaculpa2011]

8. It should be no surprise...

that third-party payment schemes result in skyrocketing costs.

But, as you said, those days are long gone. What we have today is not insurance. It's a corrupt third-party-payment labyrinth so complicated that only the insurance company lawyers can figure it out. I had a great plan back in the early 90s. It protected us (family of four) from being bankrupted my medical expenses. The cost was less than $200 per month.

Your analysis is on target, but completely lost on most people.

[Honeycombe8]

14. Yes, that's exactly what it is. A 3rd party payment scheme, wedged into our health care.

So the costs skyrocket to pay the profits the ins. cos. want.

[meaculpa2011]

20. Yes, and those calling for...

single payer want to simply replace insurance companies as the wedge with a government third-party-payment scheme. That takes the profit out of the payment mechanism, but leaves the corrupt health-care delivery system in place.

Single provider works for the NHS and our own Veteran's Administration. My Dad is 90 and has been treated by VA doctors and dentists for the past thirty years. He gets great care and the respect he deserves.

[riderinthestorm]

21. Why can't we have what the VA is providing, for all?

You seem to be implying that single payer will be as bad and corrupt as the current insurance programs.

Then you go on to praise the single payer of the NHS and the VA. Can't have it both ways.

[meaculpa2011]

23. NHS nd VA are not single payer.

They are single provider.

[NNN0LHI]

10. Nonsense

We negotiated dental insurance in 1973. The union cashiers and stock boys at the local grocery stores had the same coverage as we did.

What happened was that rather than people unionizing themselves to get the same benefits they wanted to take away what we had gained.

Don

[CrispyQ]

12. Bingo.

I had fab dental with my first grocery job in 76. Excellent benefits, great pay, overtime, shift differentials, & when other friends of mine heard about it - cuz our wages were public since they were union - they would whine how lucky I was. "Lucky my ass," I replied. "If we didn't have a union, management would not have provided any of this."

Time has shown that my young 21 year old self knew what she was talking about.

[Honeycombe8]

15. You can't argue with my experiences. In southern La. and when I moved to Dallas 1985....

almost NO ONE had dental insurance. I worked for a large law firm...neither it, nor any company I knew of, offered dental insurance.

In La., I worked from 1970 to 1985. No one I knew had dental insurance. It wasn't offered by any employer.

So the fact that it existed somewhere, at some company, is not the point I was making. It did not exist IN MY AREAS or in MOST areas in the country.

You say you "negotiated" dental insurance. Sounds like you were in a union. Union is different. Example:

I recently quit my job, then had to get another. My brother, a union man, said to me, "Tell your old company you have retired, not quit." I say, "Why? What difference would that make?" He said, "Well, you'd get your retirement benefits and package." So I have to explain to my dear brother....most people in the country do not get retirement benefits and packages. You take with you the stuff from your desk, what you've managed to save (incl. a 401K), and you leave all your benefits, incl. insurance, behind.

The first dental ins. I heard of was in the 1990's, and it was a lousy hmo-type dental ins. with a very limited list of dentists, and paltry payments, and would not pay for certain things (like caps) when a less costly temporary fix would do. It was awful. I paid for it, used a dentist under it twice then dropped it.

That is about the time that other people starting using dental ins., more and more of it, and better (and costlier) coverage. That's when the cost of dental care started to skyrocket here in Dallas TX. Caused by dental ins.

[spinbaby]

16. I don't know when your younger days were

But in the 70s and 80s we had great health insurance that cost us nothing and paid for virtually everything--including the births of both our children. In the 90s, we started having to pay for health insurance and they started requiring pre-approvals for stuff. Nowadays, we pay a LOT for insurance through work and they pay for nothing until we've laid out $1000 and then they pay for only 80% until we're $5000 out of pocket. If we have a major medical problem, about 25% of my annual salary before taxes will go to medical expenses. And we have good insurance!

[elehhhhna]

17. No maternity coverage? WTF? Are you insane?

[Yo_Mama]

22. Major medical

I happen to agree with you. It was when insurance companies took over all health care that costs skyrocketed, and that happened before the aging of the population.

Also, if we went back to the major medical model, it would be easy to fund the missing portions for the lower income population. Just give them a certain benefit a year in an HSA.

I think the country is being run for the benefit of the insurance companies, not for the people.

Car repairs would be five or six times more costly if we funded them the same way we do health care.

[meaculpa2011]

24. Excellent analogy!

How much would an oil change cost if we had to show our car insurance card and get a referral?

[alcibiades_mystery]

7. Exactly: defined benefits was paid for with decades of union blood

Defined contribution plans - whether at the pension or health care level - are little more than a symptom of the capitalists' triumph over the workers. We lost the war. For the time being, anyway.

[TBF]

5. Rec for visibility - this is why we need universal care.

Universal care as in basic health care provided through the government from birth through death. Everyone gets a SS number/card and their health card when they are born. Whenever they work they are paying into both programs. Creating large pools like this is very helpful in spreading the risk. Current insurance companies can turn their attention to selling supplementary policies if they so desire, but we need to get the for-profit middle-man out of the health care equation.

[riderinthestorm]

9. Gee, who could have predicted this...

I made a thread about this and got more than a few DUers with their head stuck in the sand.


http://www.democraticunderground.com/1002880534

My conclusion however is that de-coupling health insurance from employment will ultimately lead to single payer. Corporate pressure could be the driver that finally pushes single payer over the finish line as companies find ways to 1. avoid the penalty or 2. get out from the ever-increasing premiums.

This isn't necessarily a bad thing....

[Zalatix]

18. Ayup, several of us caught hell for saying the same thing.

[zoechen]

19. Yeah

In all fairness Zalatix was the first post that I saw right after the majority opinion came down that got it right.