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With defined contribution health insurance, an employer could contribute pre-tax funds toward employees’ insurance.
Among firms with 1-199 workers, 86 percent of those who offer coverage can only offer one plan.
DC would introduce a new element of contribution into this market.
Learn the essential facts about these plans in this NFIB Research Crib Sheet.
Download the Crib Sheet Defined benefit (DB) and defined contribution (DC) plans are different.
The A central idea behind DC health insurance is to promote competition among insurers.
DC allows employees to vote with their feet – to change insurers when they find a better price or are dissatisfied with the service they are receiving.DC would be especially valuable to small businesses.In general, small businesses have no special expertise in the area of health insurance.With DB, the employer is an active participant, and the employee is mostly passive.With DB, the employer chooses and administers the insurance plan.DC health insurance could benefit employers significantly.DC can free employers from a heavy load of administrative time.Wartime and postwar price controls made it unlawful to give raises to employees.Employers discovered that they could circumvent these controls by providing insurance rather than additional money.Employees would no longer be limited to their employer’s one-size-fits-all insurance choice.The portability of DC plans removes a source of tension between employers and employees.