Health Insurance Exchange Programs Paired with DC Plans

May 21, 2014

Employers' desires to limit health insurance costs and the new federal health care reform legislation are both contributing factors in the increased interest of private health insurance exchanges and defined contribution benefit plans. Recent research revealed this finding.

The report notes that reforms to the insurance market and rising costs for medical care have resulted in a heightened interest in placing limitations on health care cost exposure for employers. This is especially true of the health insurance exchange structure, which was defined in the 2010 Patient Protection and Affordable Care Act. This act is commonly referred to as the PPACA.

This research project also showed that many employers are interested in offering private health insurance exchange programs. With these options and a defined contribution approach, employers will be able to work quicker toward a massive consumer-driven market. They will also have more control when it comes to health care contribution costs, capping contributions and shifting authority to workers for controlling their own terms of personal coverage.

If and when employers start offering health exchange options with DC plans will depend on several factors. Researchers also say that that whether it will happen on a large scale is still uncertain. However, many researchers believe that employers' interests for lowering their risks with health benefits coupled with the new PPACA regulations is indicative of a field that could grow considerably.

Researchers also note that employers have been interested in the concept of mixing DC plans with health benefits far before the PPACA was even suggested. However, they never took further steps toward developing such a combination for several reasons. First, they were worried that a great number of employees would not be able to easily obtain individual coverage. Costs in the past have been very prohibitive for many individuals. Second, they did not want to drop group coverage in place of suggesting personal policies.

With the exchange structure from the PPACA unfolding and the insurance market reforms taking place, employers see this as an opportune time to make changes. By providing fixed-dollar contribution amounts to workers who want to buy their own policies, employers are also able to reduce their own health care insurance liabilities.

This research project did not find the only favorable outcomes to be enjoyed by employers. There were also benefits for workers. People who work are able to find a wider variety of competitive and attractive plans with so many insurance companies striving for their business. On the other hand, employers are able to enjoy better cost certainty, which is helpful in times of economic hardship.