Tag Archives: defined-contribution plans

Employers use exchanges to shift employees, retirees away from traditional benefit plans

Joseph Burns

About Joseph Burns

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at joseph@healthjournalism.org.

For years, employers have been seeking to control the rising cost of employee health insurance. Now they have a new way to limit health care spending: the public and private health insurance exchanges.

The exchanges allow employers to shift from defined benefit plans to defined-contribution plans. In defined benefit plans, employers enroll their workers, family members, and retirees in health plans and offer other benefits such as dental and vision care. In defined-contribution plans, employers give employees and retirees a fixed sum that employees can spend on benefits options in the exchanges.

In USA Today, Jayne O’Donnell reported the link between the number of employers shifting to the exchanges and the move to defined-contribution plans. She quoted Wendell Potter, a freelance analyst for the Center for Public Integrity and former PR executive with Cigna, saying: “This is an irreversible trend from defined-benefit to defined-contribution employer-based health coverage. It is comparable to the move several years ago from pensions to 401(k)s.” Tom Murphy at The Associated Press also covered this trend.

The move to defined-contribution plans may make it difficult for health care journalists to track employers’ health insurance spending strategies in the coming years because employers likely will be reluctant to report how much they allot to each worker and retiree. Continue reading