Brokers Offer New Defined Contribution Health Plans

April 26--The deadline has passed for individuals to sign up this year for the new health care exchanges under the Affordable Care Act, but local brokers are betting that many small employers will still open the way for their employees to join such exchanges this year by changing the way they pay for their workers health care.

Two Chattanooga health insurance brokers are offering ways for employers to drop their existing health plans in exchange for giving money for their employees to sign up for one of the new subsidized health care exchange plans.

At the same time, employers are also taking a look at new group health plan options that give workers many more choices for their coverage.

"There's a lot of interest among employers in moving more toward a defined contribution approach and giving workers more choices about what health plan best suits their needs," said Russ Blakely, an employee benefits consultant in Chattanooga who is launching a new technology system to provide employers and employees more health care options.

Employers with 50 or more employees who drop their group health care coverage will have to pay a penalty under the new health care law. But smaller employers who often face hefty premium increases every year may opt to switch their workers to the new individual exchanges using pay raises or defined contributions made for such plans by employers.

If an employer drops its health insurance plan, employees may still sign up for one of the plans in the individual health exchange market.

"For a lot of employers, it's going to be simpler for them, and less expensive for their lower-paid workers, to drop their group health plan and allow the individuals to sign up for one of the individual health exchanges," said David Yoder, CEO of American Exchange, a Chattanooga insurance broker that is switching its business model this month from targeting individuals to marketing to employers. "Even with the penalty, it could make sense for a lot of employers hit with rising expenses, and for many small employers this is likely to be the best option available."

Russ Blakely & Associates LLC, one of Chattanooga's biggest health insurance brokers, announced this week it is has launched a Private Exchange technology system that provides employers and employees the ability to participate in one of the fastest growing trends in health insurance -- defined contribution health plans. The new plans are available either for employers who move toward the new individual health care exchanges for their employees or for those who keep a group plan but give workers the option of choosing from among a variety of plans offered through such insurers as United Healthcare, Cigna or BlueCross and BlueShield of Tennessee.

"An employer may determine it is willing to pay $400 for each employee, and this platform will allow them to give each employee that $400 for them to choose which plan they prefer," Blakely said. "Some may want a plan with higher deductibles and lower premiums and some might want a plan with lower deductibles and higher premiums. But each worker would be able to choose what is best for them. If you have money left over, maybe you could spend that on dental or life insurance."

Like the transition in retirement plans from defined benefit to defined contribution plans, the new Real Exchange option being offered by Blakely allows employers the flexibility to make a predetermined payment for each employee.

Under a defined contribution health plan model, an employer can set aside a fixed dollar amount each month for employees to use to pay for their choice of individual health insurance or other medical costs such as doctor visits, dental insurance and prescription drugs.

Brent Wick, an employee benefits adviser with Russ Blakely & Associates, said employees participating in a defined contribution program through their employer are directed to a private exchange website, where they can compare and select a policy from among a variety of individual health plans being offered by health insurers in their area. Wick said individuals are connected to live experts, licensed in all 50 states, who can help advise individuals about their choices, regardless of pre-existing conditions or budget.

"A lot of employers are looking at these plans now, and I think over time you will see a lot more interest in moving toward giving employees more plan options," Blakely said.

Contact Dave Flessner at dflessner@timesfree press.com or at 757-6340.

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