Recently there has been a shift in the way that consultants and the insurance industry categorize employee benefits. The new language being employed closely mimics pension language and group benefit plans of different types are being broken down under new headings. Although this may have little effect on benefits bargaining it will have an effect on how employers are being “sold” benefit plans. There is a renewed effort on the part of insurance companies to increase employee responsibility for plan costs.
Defined Benefits: This language is used to categorize and sell benefit plans that guarantee certain provisions be met regardless of group/individual usage, cost increases or changes in legislation. These are generally considered to be traditional plans where everyone receives the same benefits. These plans can be entirely employer paid or a combination of employer and employee cost shared.
Shared Risk Benefits: This language is used to define plans that are blended between a traditional plan and cafeteria or flex plan. Generally plans like this offer low level core coverage that provides basic protections at reduced rates. Employees are able to buy extra coverage through a point or credit system to increase coverage to preferred levels. These plans make employees responsible for increased costs and can leave them without coverage if their situation changes.
Defined Contribution Benefits: This language is used in reference to plans that place the employee entirely on the hook for plan cost increases due to usage, legislation or general cost increases. These types of plans include health savings accounts and cafeteria or flex plans. For flex plans the value of the credits provided doesn’t generally increase in relation to increased costs so the capacity of the member to buy benefits will decrease over time. In the case of health savings accounts the employer provides a set amount of money in an account for an employee to use for health related costs. As costs increase the capacity to purchase even basic medical and dental is eroded.
Being aware of the changes in how plans are being marketed and sold to employers can help us to understand and resist pressures at the bargaining table.