Defined Contribution Health Benefits: The Next Evolution?

August 2001, Vol. 22, No. 8
Paperback, 16 pp.
PDF, 82 kb
Employee Benefit Research Institute, 2001

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Executive Summary

Defined Contribution Health Benefits: The Next Evolution?—With the return of health care cost inflation in 1998, employers once again are examining options to control their cost increases. One emerging alternative that is starting to receive a great deal of attention is a way of designing and financing health benefits known as "defined contribution" health benefits. Under this strategy, employers would make a fixed, periodic contribution to a worker's health care account, and the worker would assume full responsibility for self-insuring the care he or she needs by acquiring commercial insurance individually or through other groups. Policymakers leading thinkers on benefits, employers, and labor representatives examined some of the implications of defined contribution health plans during EBRI's May 3, 2001, policy forum. They discussed whether DC health benefits would be able to produce long-term health care cost control, which managed care has not succeeded in doing; whether they would offer workers more choice over how their health care money is spent and more flexibility in choosing their providers; and how policy issues, such as adverse selection, equity, and regulation, would be addressed.