Editor’s Note: This post and accompanying Q&A is authored by Ben Wheatley with the Kaiser Permanente Institute for Health Policy.
In a recent Perspective published in the New England Journal of Medicine titled, “Shifting toward Defined Contributions — Predicting the Effects,” Kevin Schulman, MD, discussed the increasing number of employers that are moving to defined contribution strategies in providing health care for their employees.
For employers, this move limits their financial exposure to rising health care costs by shifting the cost burden. Instead of negotiating rates with health insurance companies, employers contribute a capped amount toward their employees’ care, which gives them a suite of options for choosing coverage – along with added obligations in paying for their care as costs increase over time.
As the trend towards defined contribution grows, the nature of employer-based coverage begins to change. Institute for Health Policy Advisory Board Member Kevin Schulman, a professor of medicine in the Duke University School of Medicine and director of the Center for Clinical and Genetic Economics, discusses the implications of this shift.
Ben Wheatley: Ten years from now, will employer-based coverage as we know it still be around?
Kevin Schulman: This is one of the most interesting questions in health policy today. There are many problems with the current employer-based coverage system: it can limit flexibility in job choice, limit entrepreneurship, and, in a global marketplace, it can make American exports look more expensive next to products from countries where health care is funded differently.
The migration to defined contribution begins to break the bond between employment and coverage. Under this new approach, employees are really the ones purchasing their health benefits, and thus pay more of their own health care costs and will want to have more flexibility in their benefit choices.
Read the entire interview.
Please note: The views expressed in this article are not those of Kaiser Permanente.
