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Will defined contribution health plans get to waltz?

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Many employers want to talk to brokers or benefits consultants about setting up defined contribution health plans in a year or two.

More than one-third told a polling firm they want to start to switch next year, and 39 percent said they want to switch in 2015.

About 33 percent of the employers that hope to convert would get advice from insurance brokers, and 33 percent would talk to benefits brokers. Just 9 percent think a payroll company would be a good source of conversion guidance.

Alegeus Technologies, a company that sells health savings account program administration systems to benefits administrators and health plans, has published those results in a summary of a July survey of 502 U.S. employers with more than 50 employees.

The survey team asked benefits decisionmakers how much they had heard about the defined contribution health plan concept, when they would want to move to a DC health plan strategy, and what advisors they would use to make the shift.

Alegeus hired a polling firm to conduct the survey to determine whether the DC health plan is really on the verge of becoming a mainstream phenomenon. 

Today, most employers with traditional group health plans pay a fixed percentage of the cost of health coverage.

An employer with a DC health plan gives each employee a set amount of cash, then has each employee buy individual coverage.

Consultants have been suggesting that the debut of the DC health plan was imminent for more than a decade.

One obstacle has been that, in most states, medical underwriting rules have made individual coverage impossible for some workers to buy, and much more expensive for some qualifying workers than for others.

In January, the Patient Protection and Affordable Care Act is set to require carrires to sell individual coverage on a guaranteed-issue, mostly community-rated basis. The only individual health factors insurers will be able to use when setting rates will be age.

Many carriers, brokers and other organizations are talking about helping employers move to DC health plan programs by setting up private exchanges that could offer workers access to a menu of individual health coverage options.

Employers also could use the public exchanges to offer DC health benefits programs, but PPACA rules and state rules limit employer access to the public exchanges. Any employer could use a private exchange.

Tom Torre, the chief executive officer of Alegeus, said he sees private exchange builders moving ahead quickly in spite of Obama administration plans to push back enforcement of the PPACA employer coverage mandate until 2015. 

“We have seen no change in our customers’ plans as a result of the mandate delay,” Torre said.

Torre is hoping that the start of the public exchange program will help increase awareness of private exchanges.

Alegeus found 56 percent of the benefits decisionmakers interviewed claimed to have heard of private exchanges, but that only about 8 percent said they were very familiar with the concept.

See also: Employers weigh shifting retirees to Medicare