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After the ACA Ruling---What's next for Employer-Based Health Plans?


Buzz about the recent Supreme Court's health reform decision has hovered mostly over the individual mandate---the requirement that everyone carry health insurance---and over push back on Medicaid expansion.'  States (especially those with high-profile GOP governors) are indicating that they might not expand their Medicaid programs to catch more people in the safety net.'  But what about the 160 million Americans who have coverage from their employers?'  Remember those were the ones the president said could keep the coverage they had.

Many of those Americans will likely experience profound changes in their health insurance arrangements over the next few years---changes that have yet to make it into public conversation.'  Some will lose their employer-provided insurance.'  A Gallup poll released last week found that fewer people were getting health coverage from their employers, continuing a trend that has been going on for a decade.'  This year 55.9 percent of adults aged 26 to 64 got such coverage compared to 61.6 percent in 2008.'  More employers are simply finding the cost of medical care too burdensome.

Other employers are quietly considering an ominous shift to 'defined contribution' plans that put more responsibility in the hands of workers to buy their own insurance and to pay more out-of-pocket if they want better coverage.

To review:  With most current employer-based health plans, employers choose the coverage options they will offer and determine the portion of the total premium their workers will pay.'  The technical term for that is'  'defined benefit plan.''  The employer defines the coverage.'  With a defined contribution arrangement, the employer decides on the amount the company will contribute toward each worker's health insurance, say $5000, $8000, or $10,000.'  In effect, employees define the coverage they want.'  If the amount an employer contributes is insufficient for what employees want to buy, they'll have to come up with additional money for the premium.

Last year family premiums for employer-sponsored coverage averaged $15,073 with employers paying $10,944 on average and workers paying $4,129.'  The total premium for family coverage has risen 160 percent since 1999.'  'The only thing that's certain right now is (companies are) doing everything that's legal to shift cost to their employees,' Paul Keckley, executive director of the Deloitte Center for Health Solutions told the Chicago Tribune.

Are 'defined contribution' health insurance plans a good thing?'  Some experts think not and liken them to what happened with employer-provided pension plans thirty years ago, which has resulted in far less retirement income security for today's retirees. In the 1980s, employers began to drop their defined benefit pension plans---the Cadillac of pension arrangements that provided long-time employees a set retirement income, usually based on years of service and final average salary.' '  These became too expensive, and when the government allowed 401(k) arrangements, a type of defined contribution plan, employers dropped their good pension plans and substituted 401(k)s instead.

For most people, 401(k)s provide far less income than the old-fashioned pension plans did.'  With a 401(k) arrangement, the employer usually provides a contribution, employees add their own money and often manage their plan investments.'  The average amount in a 401(k) plan is about $75,000.'  When you convert that to an annuity or a monthly income stream of a few hundred dollars compared to a defined benefit plan that pays a couple thousand dollars, you see how those plans come up short.

Many experts fear that as state health insurance exchanges gear up in 2014, they will provide a compelling incentive for employers to shift to defined contribution health insurance and let their workers buy what they can. Bruce Vladeck, the former head of Medicare, once said the great pension shift, which resulted in a huge change in social policy, took place without a peep from the public.'  Will that happen with health insurance, too?

More Blog Posts by Trudy Lieberman

author bio

Trudy Lieberman, a journalist for more than 40 years, is an adjunct associate professor of public health at Hunter College in New York City. She had a long career at Consumer Reports specializing in insurance, health care, health care financing and long-term care. She is a longtime contributor to the Columbia Journalism Review and blogs for its website,, about media coverage of health care, Social Security and retirement. As a William Ziff Fellow at the Center for Advancing Health, she contributes regularly to the Prepared Patient Blog. Follow her on twitter @Trudy_Lieberman.

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