Strategy for Controlling Employer Health Costs to be Focus of Expert Forum in Washington TODAY

5/15/2002

From: Robin Strongin, 202-408-6889 or Kari Root, 202-292-6778

News Advisory:

Some of America's largest companies are considering altering the way they provide health benefits to employees. Expert forum to debate implications in half-day conference.

Are defined-contribution health plans -- in which companies give their employees a fixed amount of money per year to purchase their own health insurance -- the wave of the future? Employers, benefits experts, and economists will investigate the growing move toward defined contributions by some of the country's largest employers and ask whether the challenges and opportunities presented by this popular brand of cost-control suggest a new fad or a significant trend. Media are invited.

The meeting is being sponsored by The Robert Wood Johnson Foundation (RWJF) through its Changes in Health Care Financing and Organization (HCFO) initiative, administered by the Academy for Health Services Research and Health Policy. John Iglehart, founding editor of Health Affairs, will serve as moderator.

What: "Defining 'Defined Contribution' 2002: Research and Practice"

When: Wednesday, May 15 8 a.m. - 12:15 p.m. (optional lunch at 12:15)

Where: Washington Ballroom of the Westin Grand Hotel Washington, D.C.

Employers are closely following the development of defined contribution products, and given the right circumstances, might take the plunge, according to University of Minnesota economist Jon B. Christianson, Ph.D., who will be one of the speakers at the May 15 session and whose study of defined-contribution health insurance products was recently published in the health policy journal Health Affairs. A recent PricewaterhouseCoopers survey found that 50 percent of employers plan to shift to some kind of defined contribution system over the next 10 years. While other studies by benefit consultants were less optimistic, by mid 2001, the six "consumer-driven" health insurance companies in Christianson's study had announced several contracts with major employers.

The jury is still out on the future and direction of defined contribution plans, according to Christianson. The study found enthusiasm among proponents that defined-contribution health plans would deliver on their promise of significant cost savings for employers and greater choice of plans or providers and control over health care decisions for employees. But the products being offered remain in the "developmental or very early adoption stages," Christianson wrote. "The enthusiasm of employers and employees for them remains largely untested."

Representatives of several companies that have considered adopting, or have adopted, defined contribution plans will share their experience during the conference. Emma Hoo of Pacific Business Group on Health, Roger Chizek of Medtronic, Inc. and Roland McDevitt of Watson Wyatt Worldwide will answer such questions as: What factors drive benefit decisions? How did defined contribution come to your attention? and What issues arose as you considered this kind of plan as an option for health benefits?

Some employers may be attracted to defined contribution health plans because of their positive experience in switching their employees from traditional pension plans to defined contribution 401(K) and 401(b) plans. But applying the concept to health insurance presents challenges not found in relatively straightforward retirement plans, according to Kathryn Martin of the Academy. "For example, risk pooling is an important component of the employer-based health insurance system that is not as integral to retirement benefits," Martin noted. At the May 15 meeting Martin will present the key differences between the various defined-contribution approaches now being tried in the marketplace. Tony Miller of Definity Health and John M. Bertko of Humana, Inc., will offer their perspectives on the strengths and weaknesses of defined contribution plans.

Under most defined-contribution plans, employees can continue to write off their health plan contribution as a business expense. But if employees use the payment from their employers for something other than health insurance -- an option under cash models -- they jeopardize their tax deduction. Discussing tax policy implications of defined-contribution systems at the meeting will be Robert A. Berenson, M.D., senior advisor at the Academy for Health Services Research and Health Policy; Deborah J. Chollet, Ph.D., senior fellow at the Mathematica Policy Research, Inc.; and Jack Rodgers, Ph.D., director of Health Policy Economics at PricewaterhouseCoopers.

To register, call Robin Strongin at 202-408-6889 or Kari Root at 202-292-6778.