More and more employers, including Sears Holdings Corp, and Darden Restaurants, are giving employees the opportunity to purchase their own health insurance by giving them a fixed amount of money and empowering individuals to shop around for the best health insurance quotes. This approach is called defined contribution health insurance and is very different than the traditional employer-sponsored health insurance plans that dominate the market.
This is a big shift in the health insurance market and it’s important that information is communicated effectively so that people end up making the right choices for themselves and their families. Employer-sponsored health insurance plans typically have plans organized and laid out for employees to review with a human resources department prepared to answer any questions. With the shift to defined contribution health insurance, individuals are on their own as they decide which plan will be the most affordable with the best quality benefits.
David Cutler, a Harvard University economist, says this is a big, big change in the nature of what it means to carry health insurance based on the article from the Washington Post website. Before today, defined contribution health insurance existed mainly in small businesses and for retired individuals. More and more employers are considering this option as a way to combat the rising costs of covering health insurance for their employees. The average cost of health insurance for a family plan has more than doubled in the last ten years and employers cannot keep up. The nonprofit group, Kaiser Family Foundation, says the average premium is around 16,000 per year for a family plan and employers are footing about 70% of this bill and in previous years more companies covered the whole bill. These days are slipping away.
The new structure for health insurance is quickly gaining interest from employers throughout the nation. Benefits consultant Mercer, determined that about 45% of the 2809 employers it surveyed are either using or seriously considering using this new approach. Because of this, health insurance companies and benefits companies are working on online exchanges so people can easily compare health insurance plans. This could end up being a good thing if competition is sparked by more and more companies trying to obtain business.
This new approach to buying health insurance is definitely more complicated for the employees but companies see it as a simple way to cut costs, but still offer a health insurance benefit to their workers. With defined contribution plans, the company will determine a set amount of money that will be distributed to the employees which they can use to shop around for the best plan to meet their individual needs. Time will tell if this new way of offering health insurance will catch on and be the main way of doing business. If your company offers defined contribution, or you believe they will be going down this road soon, it’s in your best interest to start shopping around for health insurance quotes now.
Written by Sam Tabes
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Tags: affordable health insurance, defined contribution health insurance, employer sponsored health insurance, health insurance access