Defined contribution healthcare plans One alternative to conventional delivery of employee health coverage is the defined contribution health plan. While many employers already define their contributions to health coverage through a flexible benefit program, defined contribution plans take this one step further. Employers still provide contributions on behalf of employees, but they do not limit plan choices to the few usually offered through a flexible benefit program. Instead, employees design their own plan based on services available in their area. Employees obtain information on plans, providers, price, and other variables, and in some cases can do enrollment on the Internet.
Experts see both pros and cons to defined contribution healthcare delivery.
On the con side, some think large-scale adoption of the defined contribution model is years away because it is not realistic in the current marketplace. Although this approach can control costs, employers are wary of being the first to apply it to their own healthcare plans. Some employers would rather assume cost increases than risk alienating good employees in a tight labor market. In addition, the healthcare industry is standardizing and expanding consumer information, creating the first real retail market for health insurance. Using the Internet Internet-based approaches to delivering healthcare plans have become increasingly attractive to employers who are looking to offer their employees more choice and control, while at the same time, creating a more predictable expenditure for their healthcare benefit costs.