Last week saw developments in both the large and small group markets signifying advancement of defined contribution employer health benefits. As the term implies, rather than selecting one or more health plans for employees and deciding on deductibles, co-pays, co-insurance and dependent coverage, under a defined contribution system an employer offers employees a fixed dollar amount to be applied toward health coverage. Employees then “buy up” or “buy down” depending on the scope of health coverage they prefer.
The Wall Street Journal reported Sears Holdings Corp. and Darden Restaurants Inc. are adopting the scheme. At the same time, Aon Hewitt announced the imminent rollout of its “corporate health exchange” that it says will offer a broader array of health, dental and vision benefits options than a traditional employer-sponsored plan. According to the firm, benefits will be offered by nine national and regional carriers, including UnitedHealthcare, Cigna and Health Care Service Corporation. According to the WSJ, Sears and Darden Restaurants will use the Aon Hewitt-administered corporate exchange, which will offer five different coverage levels. (Public exchanges that will begin selling coverage in 2014 can also offer five coverage levels based on the actuarial plan value)
Meanwhile, in the small employer market, the Pittsburgh Post-Gazette reports United HealthCare is launching a defined contribution product in the Pittsburgh market. United’s Multi-Choice allows employers with 50 or fewer workers to select any number of plans among 30 separate options, from high-deductible to full-coverage plans.
PPACA expected to “barely bend” health care cost curve, challenging affordability of health insurance
The Patient Protection and Affordable Care Act (PPACA) will be unable to significantly slow the rising cost of health care. As a result, the price of health coverage will soon become unaffordable for low and moderate income Americans, concludes a projection prepared by Richard A. Young, MD, and Jennifer E. DeVoe appearing in the March/April Annuals of Family Medicine.
The authors predict based on the current rate of increase in health insurance premiums and wages and barring significant structural changes in the health care system, the average cost of a family health insurance premium will equal half of household income by 2021 and surpass the average household income by 2033. When out-of-pocket costs are added to premiums, the 50 percent threshold would be reached by 2018 and exceed household income by 2030, they forecast.
Based on their prognostication of a “barely bending” health care cost curve, Young and Devoe suggest America’s health care landscape could undergo major change. The shift away from all in employer-paid group insurance coverage in favor of defined contribution health plans could accelerate. They speculate that lower income workers could determine they can’t afford to participate in these plans and instead attempt to qualify for Medicaid under PPACA provisions expanding the government paid health coverage.
This point coincides with a Congressional Budget Office (CBO) estimate issued this month reducing the amount of people expected a year ago to obtain commercial insurance as the PPACA is implemented. “Fewer people are now expected to obtain health insurance coverage from their employer or in insurance exchanges; more are now expected to obtain coverage from Medicaid or CHIP or from nongroup or other sources,” the estimate states. “More are expected to be uninsured.” The updated estimate is based on a revised CBO economic forecast of lower wages and higher unemployment during the 2012-2021 forecast period than projected in March 2011.
Health reform seen as unstoppable in California — notwithstanding U.S. Supreme Court ruling on PPACA
While constitutional soundness of the Patient Protection and Affordable Care Act (PPACA) is to be decided this year by the U.S. Supreme Court, health care reform will continue to move along a rapid trajectory of change in California regardless of the high court’s ruling. That’s the view of health care industry panelists at a recent symposium hosted by the Sacramento Business Journal, according to this item from the California HealthCare Foundation’s California Healthline.
Michael Taylor — senior vice president of operations for Dignity Health’s Greater Sacramento-San Joaquin area — said, “We believe we need to drive health care reform whether it’s legislated or not.” He added, “Health care costs are out of control and we need to bend the curve.”
According to the California Healthline item, the panelists agreed reforms must address a shortage of primary care physicians, the need to refocus health care on prevention instead of treatment of preventable conditions, and a transition away from employer-based health coverage to a new model where individuals dictate plan purchases instead of employers. I’ve lately read suggestions by some observers that shift could take the form of a defined contribution health plan.