As a teenager, I remember the occasional visits to the local swimming pool. I also remember that about once an hour, the lifeguards on duty would periodically clear the pool, ostensibly to clean out debris, to enforce a certain rest break on the swimmers (and doubtless for the lifeguards), and perhaps to assure that all the swimmers were still able to get out of the pool. Then, after what seemed to my teenage senses like an eternity, the lifeguards would blow a whistle—the “all-clear” signal for everyone to jump back in the pool. They were very strict about this—and kids were routinely banned for an hour, or even the rest of the day for jumping in “early.” As a result, even after the whistle, most of us would hesitate and look around to make sure that we weren’t the only ones going in.
A recent EBRI Issue Brief¹ notes that it was only about a decade ago
that defined contribution (DC) health plans, arrangements that shift choice of
health insurance from employers to employees, were the focus of much attention.
As far back as the late 1990s, more than 62 percent of health care leaders
predicted that employers would move to DC health plans by 2010.
That trend never fully emerged, of course—employers were hesitant to drop
group coverage in favor of offering individual policies, some were likely
concerned that many employees would not be able to secure coverage in the
individual market, some others drawn to the tax advantages. Many viewed the
benefit as an important tool in attracting and retaining a strong work force,
and surveys, including EBRI’s Health Confidence Survey (HCS), suggest that
workers do, in fact, appreciate the offerings.
EBRI’s Paul Fronstin notes that the combination of insurance market reforms
and the embodiment of the exchange structure² in PPACA have brought a renewed
focus on limiting the employer’s health care cost exposure by providing a
fixed-dollar contribution that workers could use to purchase individual
policies. He notes that the vehicle that some are interested in using for
providing coverage is a private health insurance exchange, through which
employers might be better able to accelerate the drive toward a more mass
consumer-driven insurance market—and in the process gain more control over their
health care contribution costs, while shifting to employees the authority to
control the terms (and to some extent, the costs) of their own health
This should sound familiar to those who have watched similar motivations lead
to the shift in retirement plan emphasis from pension plans to defined
contribution/401(k) retirement benefits. The question is, will the combination
of factors provide employers with the “all clear” sign to undertake changes they
have, thus far, been hesitant to take?
And if that all clear sign is given, will
employers all jump in at once?
- Nevin E. Adams, JD
¹ In addition to a historical perspective, the July 2012 Issue Brief
examines the issues related to private health insurance exchanges, the possible
structure of an exchange and how it can be funded, as well as the pros, cons,
and uncertainties to employers of adopting a private exchange. MORE.
² Fronstin notes that private exchanges are already in development partly
because of the uncertainty related to the status of state-based exchanges.
Development of several of these were postponed, pending resolution of the
PPACA’s constitutional challenge. Several Republican governors have said they
will refuse to establish state-based exchanges, leaving them to the federal
government to run. As recently as March 2012, the majority of states had still
not taken the necessary steps to establish an exchange.