A report, The Rise of Retail Health Coverage, by the consulting firm PriceWaterhouseCoopers LLP shows that about one third of employers are considering moving health insurance benefits for their active employees to a private health insurance exchange in the next three years. The growth of private health insurance exchanges will allow more employers to shift to defined-contribution plans, thus helping them control costs more effectively and move away from having a strong role in managing employee benefits, the report explains. Moving health benefits for employers to a private exchange will allow employers to shift from defined-benefit plans, in which they pay for certain health insurance benefits, to defined-contribution plans, in which they give employees cash so employees can buy health insurance benefits for themselves and their families.
In many ways, the movement to defined-contribution plans is like the shift that occurred beginning in the mid- to late-1980s when employers moved away from traditional pension plans to 401(k) plans, PwC said. Under traditional defined-benefit pension plans, employers provided lifetime payments to former workers upon retirement. Under 401(k) plans, they could give employees funds that could be used for retirement plans and could stop paying when employees retired or were otherwise no longer employed. Shifting responsibility for retirement planning and health benefits gives employers more control over rising costs, the report said.
Not all employers will shift benefits to private exchanges, the report added. Small employers may be able to shift to a public exchange without penalty, for example, and some of the largest employers will still prefer to manage their own benefits. The report was based on PwC’s 2014 Touchstone Survey of more than 1,200 employers from 35 industries in the United States.