Why Payers Like Defined Contribution Programs

Margaret Dick Tocknell, for HealthLeaders Media , September 6, 2013


Low administrative costs and the capability to compete with public health insurance exchanges are driving factors. So is the promise of access to big data, which can give payers a strategic edge.


Change keeps on coming to the health insurance industry.

Pittsburgh-based Highmark Health Services is in the process of expanding its defined contribution products to large group employers. The expansion follows a successful year-long pilot with small group employers (fewer than 100 employees) that attracted 60 companies and about 6,000 covered lives, says Bill Brown, manager of digital distribution for the giant Blue Cross Blue Shield affiliate.

In January, Highmark made the product line available to employers with more than 100 employees. Now it is marketing to large employer groups (more than 1,000 employees).

To date it has enrolled around 100 companies with about 9,200 covered lives.

In January 2014, Highmark will add its defined contribution product line to its Delaware and West Virginia markets. The products are offered though Highmark's proprietary health insurance exchange, MyBenefits.

For employers, defined contribution plans take the guesswork out of budgeting for healthcare costs from year-to-year. An employer puts a cap on how much to spend on employee healthcare benefits. Each employee receives a set amount of money to spend on the exchange to purchase the health benefits that meet his or her needs.

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