Defined Contribution Gains Momentum

Published October 1, 2001

Defined contribution continues to make slow inroads into the benefits market.

We previously reported MyHealthBank is entering the Washington market and UNICARE is entering Illinois. Now, UNICARE has announced it is also entering Indiana.

Definity Health has just inked a deal with Rhode Island-based Textron to provided benefits to about 1,700 of its 45,000 employees. Ultimately, the program will reach all Textron employees. Definity’s product is very much like a Medical Savings Account for large employers, with a lot of online consumer support. Textron joins Medtronics, Aon Corporation, the University of Minnesota, and Dade Behring on Definity’s list of major accounts.

New Hampshire-based Choicelinx has entered an agreement with McKesson Health Solutions to provide medical management and patient advocacy services to help employees self-manage their health and benefits. No word yet on whether Choicelinx is actually selling any product.

American Medical News reports on a defined contribution conference held in Chicago last month. Staff writer Julie Jacobs writes, “managed care in its current form is nearing the end of its life cycle, and whatever form of health insurance takes its place will give consumers much more control and choice over their health benefits.”

According to Jacobs, most of the speakers at the Global Business Research conference expect the next wave to be a modified version of the existing system, rather than a radical switch to a full-blown defined contribution.

Jacobs also pointed out, as we have in Health Care News (see “The Pulse,” September 2001), that there appears to be a serious disconnect between managers—who doubt their employees’ ability to make health care decisions—and employees themselves, who are very eager to have a choice of health care plans with different levels of employee contributions and benefit levels.

Defined Contribution and Financial Institutions

Booz-Allen Hamilton is focusing more on the opportunity presented to financial institutions by the switch to defined contribution.

In a new report, “The Next Trillion Dollar Opportunity,” authors Gary Ahlquist, Phillip Lathrop, and David Knott point out that defined contribution will create 50 to 100 million new individual investment accounts, and that financial institutions will probably service the bulk of these accounts. Those firms will also be able to co-market online checking, credit cards, mortgages, and other lines of insurance as well.

Ahlquist et al. mention that a British firm is already eye-balling the potential market, and that other players are more likely to come from the banking and investment communities than from health insurance companies.

Silicon Valley is looking closely at defined contribution, according to a story in the San Jose Business Journal. The story features a real estate firm, BT Commercial, that changed its benefits from a single Lifeguard plan to a menu of options that includes Aetna/USHealthcare, HealthNet, Cigna, and Blue Shield of California. The package was assembled by broker eGroupBenefits.

Greg Scandlen is senior fellow in health policy at the Dallas, Texas-based National Center for Policy Analysis and assistant editor of Health Care News.