Interest in Private Health Insurance Exchanges, DC Health Plans Likely to Gain Ground Post-PPACA

July 19, 2012 — Federal health-care reform legislation and the desire for employers to limit their health insurance costs likely will fuel interest in defined contribution (DC) health plans and private health insurance exchanges, according to a report from the Employee Benefit Research Institute (EBRI).

The report says the combination of insurance market reforms, especially the health exchange structure in the Patient Protection and Affordable Care Act of 2010 (PPACA), as well as rising health costs, have brought a renewed focus on limiting employers’ health-care cost exposure.

Paul Fronstin, director of EBRI's health research and education program and report author, said the vehicle that some employers are interested in using for providing coverage is a private health insurance exchange. Through these exchanges, in tandem with a DC funding approach, employers can accelerate the drive toward a more mass consumer-driven insurance market and gain more control over their health-care contribution costs, capping their contributions, and shifting to workers the authority to control the terms (and to some extent, the costs) of their own health insurance.

"Ultimately, whether and how the movement to private health insurance exchanges and DC health plans will occur is still subject to various influences and remains highly uncertain," Fronstin said. "But the enactment of PPACA and employers' interest in reducing the risk of their health benefits costs indicate this is a field that is likely to grow."

The full report is published in the July EBRI Issue Brief, "Private Health Insurance Exchanges and Defined Contribution Health Plans: Is It Déjà Vu All Over Again?"

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