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The fact that insurance premium prices jumped an average of 10.3% last year across all kinds of health plans — HMOs, preferred provider organizations, point-of-service, and indemnity — has encouraged both corporate and government policy-makers to search for ways to cut medical costs. According to a recent survey by Watson Wyatt Worldwide, a Washington, DC-based consulting firm, the most popular reaction to skyrocketing plan payments has been to pass on part or all of these premium hikes to workers (71%).
On the policy front, a combination of business and medical groups is quietly working to build a political foundation to pitch so-called "defined contribution" health plans as a way to limit future corporate health care costs. The basic idea behind the defined contribution approach is to shift the responsibility, payment, and related risk of selecting and maintaining health benefits from employers to employees. For instance, a firm could agree to continue to contribute a certain amount of money in the form of a voucher that employees would use to negotiate for and buy their own health coverage, says a company report on the survey.
Some benefit experts also contend that a defined contribution health program could be modeled after Section 125 cafeteria plans that allow employers to allocate plan assets to a variety of services, including health care, dependent care, and life insurance. "As managed care becomes more complex, health care costs continue to rise, and technical innovation in the medical area advances, some employers may find defined contribution-based benefits increasingly attractive," notes Dallas Salisbury, president of the Employee Benefits Research Institute in Washington, DC.
In recent months, Blue Cross of California and Myhealthbank Inc. in Portland, OR, have introduced modified versions of defined contribution health plans targeted to smaller businesses. Dave Sanders, MD, CEO of Myhealthbank, calls his company’s program a "first step toward moving the economic control from employer to employee."
Under the Blue Cross plan, small firms pay a fixed amount in health care premiums per month. Employers can pick any amount they want to contribute to employee health premiums above the minimum floor of $100 per employee per month. Employees, in turn, are permitted to pick their care from any of Blue Cross of California’s eight PPOs and two HMOs.
Premiums range from $65 per month for a bare-bones plan to $200 a month for the one with the most comprehensive benefits. Employees pay the premium difference if they choose a plan that costs more than what the employer is paying each month, or they can pocket the difference if the plan costs less.
Myhealthbank has teamed up with Regence BlueCross BlueShield of Oregon to offer a similar plan to small businesses in Oregon. As in Blue Cross of California’s defined contribution product, employers who sign up for the Myhealthbank program pay a flat fee per employee, with employees picking up any difference between what their company pays and the cost of the plan they pick. The big difference is that unlike Blue Cross of California, Regence limits the range of plans employees can select to join on the premise that this reduces confusion.