More employers changing to defined contribution plans for health insurance [View all]

[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.