The next generation in online publishing...
Sign up to read the digital versions of Managed Care, P&T, and Biotechnology Healthcare. These digital editions are free, searchable, and can be downloaded and read offline. To read a sample of the digital version of Managed Care, follow this link:
Sample digital edition
Register for a free digital subscriptionArchive issues of Managed Care:
MANAGED CARE February 2001. ©MediMedia USA
Sidebar to accompany: Defined Contribution: Why It Won't Happen Any Time Soon
Comparing employers', employees' views on defined contributions
For a defined-contribution system to work, both employers and employees must be receptive. In the fall of 1999, two independent market research companies under the auspices of KPMG surveyed 103 senior executives at Fortune 1000 companies, and 14,626 employees who work for them, to test receptiveness to the concept.
The survey was conducted in cooperation with Regina Herzlinger, Ph.D., of the Harvard Business School, and one of the foremost proponents of a defined-contribution system.
The Fortune 1000 companies were chosen because, the survey's authors state, "as leaders in the nation's economy, these were viewed as the most promising candidates for being 'early adapters' of the new concept."
While 46 percent of senior executives contacted were "receptive" to the idea; 31 percent were "unreceptive"; and another 11 percent were undecided. Both the receptive and unreceptive groups admitted that any interest in defined contributions was sparked by attention to two old standbys — cost and choice.
Employers hope that defined contribution would offer better choice, cost...
Perceived advantages of defined contribution*
*Total exceeds 100 percent due to multiple responses to a question....and add that tax laws would have to change.
A changeover to defined contribution could come only if — and this is a huge "if" — senior executives believed that there would be no effect on their or their employees' tax situation. "Under the current system of defined benefits, the employer's contribution to health insurance coverage is tax deductible," the survey stated. "Totaling about $100 billion annually, this tax break represents the third-largest federal expenditure behind Social Security and Medicare."
...but are aware of barriers...
Whether employers were receptive or unreceptive to the defined-contribution concept also influenced what they saw as barriers to implementing such a system. Those barriers, whether real or perceived, were daunting for both sides.
SOURCE: A NEW DIRECTION FOR EMPLOYER-BASED HEALTH BENEFITS, KPMG, 2000