Will Employer Health Insurance Go the Way of Pensions?

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doctor's office patient
For years, employers have been getting out of the pension business. With old-style pensions giving way to 401(k) plans, most workers are now responsible for making their own investment decisions for their retirement.

Now it appears that companies may start doing the same thing with their health insurance benefits. The resulting shift could leave employees with a lot more work to do to manage their health costs.

A recent report from the Employee Benefit Research Institute shows that fewer than half of the employers it surveyed are certain about their plans to continue offering traditional health benefits to their workers. A substantial portion of the remainder expects to seriously consider moving to what is called a "defined-contribution" strategy for health benefits.

"Defined contribution" is a fancy term for employers putting in a specific upfront dollar amount toward benefits. 401(k)s are defined-contribution plans because they don't guarantee a certain benefit during retirement; rather, the company promises to make employer contributions that may or may not grow over time.

With health care, define contribution means giving employees a certain dollar amount with which they can buy health insurance. When employers first looked at the idea around 10 years ago, individual health insurance was difficult to obtain. With the passage of health-care reform laws, however, private health insurance exchanges could make the individual insurance market more of a viable option, and companies are again looking at whether fixed-dollar contributions toward health insurance make sense.

Winners and Losers

Defined-contribution health plans have the potential to be a win-win scenario for employers and workers. For employers, advantages include more predictable costs, less administrative hassle in negotiating for and managing group coverage, and uniformity of benefits across different locations.

Workers, on the other hand, get the flexibility of choosing their own plan, giving them more incentive to shop for cost-savings and to tailor insurance policies to their needs, rather than picking a cookie-cutter policy. Yet with individual health insurance still difficult to get in most states, whether or not that works depends on whether the Affordable Care Act actually succeeds in building markets for competitively priced policies for individuals to select.

If employers do pursue defined-contribution health plans, workers will need to demand that employers actually contribute. If employers back away from health-care expenditures the same way they took away 401(k)-matching temporarily during the recession, then workers will be in much worse shape than they are today. That makes it critical that you keep your eyes open at work to possible changes in the near future.

Motley Fool contributor Dan Caplinger proudly relies on his wife for health insurance. You can follow him on Twitter @DanCaplinger.


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41 Comments

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Tina

Welcome to my world. Because I'm self-employed, I pay about $500 a month for health insurance and that doesn't even include dental. You workers have had it far too easy for far too long. I'm going to love watching the same republican't who b!tched about paying for other people's health insurance when it was just handed to them whine like toddlers now that they're expected to chip in.

August 19 2012 at 2:05 AM Report abuse rate up rate down Reply
chris1011

Two groups used the 47th anniversary of Medicare Monday to alert the elderly in Wisconsin to proposed changes that would affect the government health care program. The lunchtime presentation at the Madison Senior Center was one of four statewide celebrations of Medicare's longevity.

About 25 seniors listened as Billy Feitlinger from the Wisconsin Alliance for Retired Americans explained that Medicare would change if federal health reform is repealed.

He said colonoscopies wouldn't be covered and prescription drug costs would rise for some. Without mentioning political affiliation of those proposing to get rid of the Affordable Care Act, Feitlinger encouraged the elderly to contact their lawmakers on this issue. "So some people in Congress want to repeal it," he said. "You have a responsibility, Congress, if you want to repeal it the Affordable Care Act, to tell with what we want to replace it. "

In addition, paying for Medicare could change. Wisconsin Republican Paul Ryan has proposed replacing Medicare with vouchers to buy private insurance. Seventy-year-old Gene Wells of Madison doesn't' t like this idea. "I don't think the voucher is enough to pay for health care," he said. "I think it should be provided under Medicare for senior citizens."

The Medicare briefings were held in in Eau Claire, Milwaukee, Green Bay and Madison. They were put on by the Wisconsin Alliance for Retired Americans and Know Your Care Wisconsin.

July 31 2012 at 11:58 PM Report abuse rate up rate down Reply
Setanta

now who's the genius that STARTED ALL THE BS that your EMPLOYER WAS RESPONSIBLE for YOUR health INSURANCE ? not care----INSURANCE ?

and of course the inhouse MORONS BELIEVE that teddy the swimmer,PELOSI and obummer WILL DO A BETTER JOB running the HEALTH CARE.

July 31 2012 at 11:53 AM Report abuse -2 rate up rate down Reply
1 reply to Setanta's comment
theycallmeroy3

I take it you want an answer to your question? The genius was government. The NLRB. You know, there was a time in history where the NLRB limited what employers could pay their employee's. Bascially to control inflation.
Instead rules were relaxed when it came to benefits, and healthcare insurance fell into that category. Hospitals weren't far behind in offering cheap insurance to lure more patients in. So, they targeted large groups to offer in-house insurance. Blue cross Blue shield came out of that idea. And the IRS gave employers tax incentives to offer employee's that benefit. Labor unions were on board for that one too.
Both political parties have been involved in one form or the other in the healthcare industry. And its high unlikely, regardless of political party, that's going to change. It comes down to picking your poison. Which one kills you first. Its obvious, you would like your tombstone-jar to read:

Here lies Setanta: Killed by Republicans and not by those Dang Democrats.

July 31 2012 at 2:56 PM Report abuse +3 rate up rate down Reply
seattlewkr

Single payer system, please.

This BS needs to stop. We'll all be living in cardboard boxes soon.

July 31 2012 at 10:33 AM Report abuse +4 rate up rate down Reply
1 reply to seattlewkr's comment
chris1011

You will NEVER get single payer as long as Tea Party congressmen get elected. No matter who is president, these congressmen hold the real power, and if they don't want it, then it will NOT happen. You want change? Elect a progressive to congress, otherwise sit silent and accept the situation that we have now - a katzenyammer lollapalooza.

July 31 2012 at 11:38 AM Report abuse +2 rate up rate down Reply
1 reply to chris1011's comment
Setanta

prOgressives,libturds and diMs all go in 2012.
and DEFINITELY you WILL SIT IN SILENCE and thank harry the moron reid for his work in PREPARING THAT FILIBUSTER PROOF SENATE !
and REMEMBER IT WAS reid THAT did this.

July 31 2012 at 11:50 AM Report abuse -3 rate up rate down
johnskii

As a decades long Independent voter I would say the average, middle class , working, taxpaying , private worker is going to be $crewed no matter who is elected president. It is very sad things have gotten this bad.......

July 31 2012 at 9:47 AM Report abuse +4 rate up rate down Reply
1 reply to johnskii's comment
Setanta

sad ? what's TRAGIC IS THE FACT THAT WE LET IT ALL HAPPEN.
vote these BUMS OUT in 2012---once and for all.

July 31 2012 at 11:51 AM Report abuse -1 rate up rate down Reply
teb829

URRACISTS= IDIOT!!!!!!!!!!!!

July 31 2012 at 9:43 AM Report abuse +5 rate up rate down Reply
teb829

WHY THIS COUNTRY DOESN'T GO TO A SINGLE PAYER,MEDICARE FOR ALL, SYSTEM IS UNBELIEVABLE..IT COSTS LESS AND COVERS EVERYONE...HEALTH INSURANCE COMPANIES NEED TO BE SENT PACKING.. THE BILLIONS THEY MAKE IN PROFITS WOULD BE BETTER SPENT PROVIDING HEALTHCARE AND LOWERING COSTS..

July 31 2012 at 9:42 AM Report abuse +6 rate up rate down Reply
2 replies to teb829's comment
chris1011

You will NEVER get single payer as long as Tea Party congressmen get elected. No matter who is president, these congressmen hold the real power, and if they don't want it, then it will NOT happen. You want change? Elect a progressive to congress, otherwise sit silent and accept the situation that we have now - a katzenyammer lollapalooza.

July 31 2012 at 11:33 AM Report abuse +2 rate up rate down Reply
Setanta

costs LESS ? only a moron POSTS THIS.

July 31 2012 at 11:55 AM Report abuse -1 rate up rate down Reply
franzr00

Will it be a situation where the executives get gold plated health coverage fully paid by the corporation, while employees are given a token amount of money to try and find insurance on their own, and then have to deal with the hassle of filing all the forms, fighting for coverage, etc.?

My former company (I am retired) has a health care advocate, who will intervene in disputes which gives me a lot more clout then if I were on my own. In addition, they are self insured, so they can make exceptions to vague rules.

I recently had a situation where they wouldn't provide coverage when the plan clearly indicated it was covered. The health care advocate carefully explained that they needed to go to page two of their reasons for denying everything to see that it really was covered.

Yes, the company is self insured, but they use insurance companies to monitor the bills, and those insurance companies are still with the mindset to deny everything possible. And I don't have access to the hundreds of pages of the specific rules, only summaries. But the advocate does.

Health care exchanges, run by the States? Meaning set up by politicians to benefit their corporate overlords and the expense of the workers? That is a very big gamble.

July 31 2012 at 9:24 AM Report abuse +2 rate up rate down Reply
Richard & Debra

I want Employer health insurance to go away.

That way I will get paid for only doing my job. A lot of employer call it a benefit but I would prefer you pay me and I will go to the insurance market and get the best insurance in benefits and price for my families situation at that time.

I have had the experience where my employer got the best insurance for the company but not the best insurance for its employees.

July 31 2012 at 7:19 AM Report abuse +3 rate up rate down Reply
1 reply to Richard & Debra's comment
skylinegra

You think it will be cheaper? If an employer offered you the " best insurance " for the employee, as you say, you think he'll just pick up the extra cost? No, YOU will.

July 31 2012 at 9:23 AM Report abuse -3 rate up rate down Reply
1 reply to skylinegra's comment
Setanta

that's WHY THERE IS NO FREE ANYTHING.
freeeeeekin subpar insurance WE PAY FOR via union dues,DEDUCTIONS and co-pays.
why the hell people CANNOT DO THE MATH and see the THOUSANDS they are screwed out of ?
if you THINK YOU'D SPEND THAT MUCH via "pay per visit" you need to be on DISABILITY and have your freeeeeeeeeeeeeeekin medicaid .

July 31 2012 at 11:58 AM Report abuse -1 rate up rate down
ha6ai

Obamacare, if not reversed, will destroy employer-provided health care.

July 31 2012 at 4:37 AM Report abuse -3 rate up rate down Reply
2 replies to ha6ai's comment
skylinegra

Exactly !! I'd like to start a private clinic and hospital which would take ONLY cash. Absolutely NO insurance. Would be legal AND cheaper. I guarantee you, I'd have no problem attracting nurses and doctors.

July 31 2012 at 9:25 AM Report abuse -1 rate up rate down Reply
Setanta

THAT'S THE IDEA---force ALL COMPETITION OUT leaving US with this crap.

July 31 2012 at 11:59 AM Report abuse -2 rate up rate down Reply