Health Insurance Is Going the Way of Retirement Plans

Just a couple decades ago, American retirement plans made a big shift from pensions to 401k’s.  Instead of receiving a defined benefit pension, workers started contributing to plans and making their own decisions about how they would receive their money.  A lot of people are forecasting a similar change in the health insurance industry over the next 5-10 years.  Right now many employers offer health insurance in a defined benefit way.  They choose the exact health insurance options and you can choose to pay for the plan or opt to buy your own individual health insurance.  Insurance News Net posted an article from The Pittsburgh Post-Gazette’s Bill Toland which says that “In 2020, Workers Will Decide (their own) Health Benefits.”

Many experts believe that the face of health insurance will change dramatically.  They forecast that people will shop online and choose the specific health insurance options that they want for themselves from private exchanges.  Companies will pay a certain stipend to their employees via a health account and that will go towards their health insurance plan costs.  If people choose a health insurance plan that is more than their employer stipend, they will have to pay the rest of the bill themselves.  They will shop in online private health insurance exchanges run by health insurers, like Highmark, or benefits consultants or brokers..  If an insurance company is running the exchange, all of the plans will be from them.  But if the exchange is run by benefits consultants or brokers, there will be plans from multiple insurance companies.  Plans will differ in prices and coverage.  Each exchange will likely offer around 6-10 different plans.

It was easier for large companies to make the pensions switch because they almost immediately saw huge cost savings.  It is a little different with the health insurance plans because although they will not see huge cost savings, they will see a large reduction in the amount of administration.  They are also offering better benefits to their employees, making them more competitive as employers.  But small and mid-sized employers will see even more benefits initially than the larger companies.  Experts predict that many smaller companies will make this switch to private exchanges in the next year and a half.  Larger companies will switch as well, but it will take a large employer like McDonalds or WalMart making the big move before many other make the jump as well.

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