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Defined Contribution Health Care Plans.

"Defined Contribution Health Care Plans" is a subject that is getting a lot of press these days. Any alternative plans to slow the debilitating effects of health care premiums on employers will get a good deal of attention, as these plans are now.

"Defined contribution" plans are sometimes described as consumer driven or self-directed health plans.

In using these plans employees will begin to take over some of the responsibility for the economics of their own health care. With a defined contribution health insurance program the employee chooses their own health plans using the money their employer has already allocated for the employee.

"Defined care" is an umbrella term for these plans. Most plans have really only become available in the past two years. The ideas have been kicking around for a while, but only relatively recently are they becoming a reality for many companies.

No solid standard exists for defined care plans right now, but they are being tried out and evaluated by increasing numbers of employers. Some new third party management companies are entering this field, and individual insurance companies are beginning to formulate their own versions of these products.

Essentially here is how most plans are formulated:

• Each employee gets an annual tax-free health-care fund. (For this example, lets say around $1,000 - $2,000). The employee may spend that on any medical expenses they choose with any doctors they would like. The employee may roll over any remaining funds into the next year, if there is money left over.

• If the expenses rise above $1,000, the employee has a high deductible which the employee must pay. After $1,500, company coverage takes over, often a PPO plan. Expenses for wellness and pediatric checkups often do not count against the initial $1,000 fund, and many plans offer immediate catastrophic coverage to guard against emergencies.

• Employees may be given up to 10 or 12 health plans to choose from. Because the employee chooses how to spend the defined contribution amount, the employer doesn't have to be responsible for the cost differences between any of the available plans.

• The employee will choose how their money is spread among their medical, dental, or vision needs. The idea is to give the employee an incentive to research health providers, choose lower priced drugs, and more carefully consider some doctor's visits, among other things.

• There is no co-pay, no middleman, and no paperwork for reimbursements.

* This link is for a list of articles from the Defined Care Article Library.

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