Defined contribution plans, private exchanges could steer employers to savings

Employers increasingly see the potential for healthcare savings in defined contribution plans (DCPs), according to the latest Healthcare Trends Institute report. But that's only if an employer has talked to an insurance broker, consultant or carrier about the benefits of a DCP.

The report surveyed more than 250 human resources and employee benefit specialists. For those familiar with the DCP model--which gives employees a set amount, or defined contribution, to spend on healthcare benefits--the biggest value is helping employees first understand benefit costs and then make more cost-conscious benefits decisions. With high deductibles causing an increasing number of Americans to delay medical care, greater consumer awareness of healthcare costs takes on added importance.

Defined contribution plans are also closely tied to private insurance exchanges, which could see 300 percent growth in 2015. That's because such exchanges give employees a wider range of plan and network options than they might otherwise have in a more traditional employer-sponsored health plan.

"Addressing organizational healthcare costs remains an important goal for employers using a DCP strategy," the report said, "but so does involving the employee in the process to help ensure positive healthcare outcomes that are beneficial to both employers and their workforce."

That said, more than 40 percent of survey respondents have yet to even begin exploring the possibility of offering a DCP plan. When those benefits managers start doing their homework, 50 percent say they will turn to an insurance broker, 30 percent will look to a benefits consultant and 16 percent will talk directly to insurance carriers, according to the report.

This isn't surprising--insurance brokers have taken on an expanded role so far in 2015, partly because of the employer mandate and partly because of the complexities of public and private insurance exchange enrollment, FierceHealthPayer previously reported.

Finally, while only 11 percent of survey respondents interested in implementing a DCP had done so for 2015, 61 percent report they will consider it for 2016 and another 22 percent may do it in 2017. The reason: They want to avoid the Cadillac tax, which goes into effect in 2018.

For more:
download the report (.pdf)

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