Ventura County Star
March 1, 2001
“Thousand Oaks-based Blue Cross of California announced a program this week aimed at enabling small businesses to subsidize employee health care coverage at defined rates.”
“Under the program, employers pay a fixed dollar amount per employee per month toward the cost of health care coverage. Employees are responsible for costs above the employer’s contribution.”
Comment: So Blue Cross is creating a program that will make employee health insurance affordable for small employers who cannot afford (or have elected not to pay for) the costs of existing health plans. But what is happening here?
Blue Cross is the largest and one of the most successful insurers in California. They often set trends in insurance coverage. This plan is the first one of this nature, but we can expect other companies to follow.
Since the premium paid by the employer is the same for each employee regardless of age, number of dependents or other risk factors, this is a DEFINED CONTRIBUTION proposal. The dollar amount set by the employer will be as little as $80 per employee. Each employee can then chose from a menu of Blue Cross plans, the higher the level of benefits, the more expensive the plan. The greatest defect with defined contribution plans is that low income employees will be able to afford only bare bones coverage if even that. Defined contribution plans inevitably result in multiple tiers of health care, boutique medicine for high
income individuals and limited access and impaired outcomes for those with lower incomes.
Blue Cross, since converting to a for-profit company, has refined its business models for coverage. The traditional concept of a defined contribution plan is to allow the employee a given amount of funds to be used to select from a wide variety of health plans in the marketplace. Blue Cross has figured out a way to capture this under-served market by offering employers the advantage of a fixed contribution plan, but, at the same time, locking the employees into a menu of plans offered only by Blue Cross. Employers can assuage their guilt at a low cost,
employees will get only mediocrity but with significant out-of-pocket expenses, and Blue Cross will walk away with the dough.
Isn’t it time that we dump these marketplace health plan parasites, and replace them with a publicly administered, universal risk plan?