Are Defined Contributions a New Direction for Employer-Sponsored Coverage?

Publication Date: October 2000

Publisher: Center for Studying Health System Change

Author(s): Sally Trude; Paul B. Ginsburg

Research Area: Health

Type: Brief

Abstract:

Defined contributions for health benefits are being promoted as the new silver bullet for employers to combat the rising costs of health care, the managed care backlash and the changing climate for employer liability. As interest in this concept grows, so does the number of proposed alternatives for implementing it. Originally called fixed contributions, defined contributions now also refer to cash transfers or vouchers, with reliance on the individual market for health insurance. A more recent angle for defined contributions is using the Internet as an on-line marketplace for purchasing health insurance. This Issue Brief examines defined-contribution strategies and assesses issues relevant to employers, employees and public policy makers.