Employers have found that employees like to manage their own retirement accounts, selecting the funds in which to invest and how much money they want to put into the plan.
That concept also holds true in healthcare, says Dave Sanders, M.D., CEO, president and co-founder of Myhealthbank, an Internet-based defined contribution program for employers with between 26 and 250 employees.
"This recognizes that consumers are the wisest stewards of their own retirement planning and healthcare planning," Sanders says. "We think the notion that people are the wisest stewards of their money . . . is an appealing concept that comes across all societies, that they are the best ones to chart their own course. We trust people to make their own decisions."
Myhealthbank has partnered with Regence Blue Cross Blue Shield in Oregon to introduce an entry-level defined contribution product, Sanders says. Seven employers with about 1,000 employees total have signed up for Myhealthbank. The company has been signing people up over the past several months.
Employers designate a fixed amount of money for each employee for the year. Employees can then select from several plans to provide their health insurance. If a plan costs more than their employer's contribution, employees make up the difference with pretax dollars.
If employees choose a less expensive option, they can put the money left over in what's called a Blended Freedom Account. The account allows enrollees to spend the money on services that may not be covered. Or the employee can carry that money over to the following year, Sanders says.
About 60% of enrollees have selected a health plan that matches their employer's financial contribution, he says. About 20% bought a more expensive option, and the remaining 20% bought an option that costs less than their employer's contribution.
Managed care hasn't been as effective as employers had hoped in controlling premium costs, Sanders says. That coupled with employees' desire for more freedom in their health plans creates the perfect environment for defined contributions, he says.
"The reality is we're seeing a very driving demand," Sanders says.