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Defining what ‘Defined Contributions’ mean for work-based health insurance

October 3, 2019

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What if employers started giving workers a chunk of cash to buy health insurance on their own instead of offering them a chance to buy into the company plan? Are workers ready to manage their own health insurance like they do their 401(k)?

The idea that employers might decide to drop their health plans and replace them with a “defined contribution” for employees has been around for years. It’s one way for employers to control their expenses in the face of relentlessly rising health care costs. Now that the health law has created new online marketplaces where people can shop for coverage and made the individual market more accessible and affordable, the idea is gaining traction.

“The technology has caught up to the concept,” says Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute.

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