Why one payer is expanding its defined contribution plan

Administrative efficiency, a competitive edge among the benefits of such plans

Fresh off the success of its one-year pilot with small businesses, Highmark Health Services come January will begin pitching defined contribution health plans to large employers, through which workers receive a fixed sum to buy coverage on a private, online marketplace.

The Pittsburgh-based insurer will expand its defined contribution products to large employers in its Delaware and West Virginia markets. The products will be offered though Highmark's private exchange, MyBenefits, which is separate from the Affordable Care Act's (ACA) government-operated marketplaces.

The expansion follows a one-year pilot with small group employers that attracted 60 companies and 6,000 covered lives, says Bill Brown, manager of digital distribution for Blue Cross Blue Shield. To date, 100 small- and mid-sized companies with about 9,200 members have enrolled in MyBenefits, which makes it easier for them to rein in spending on employee health benefits.

Employers' interest in private exchanges and defined contribution plans has skyrocketed in the last six to eight months, according to Brown, with firms seeking out new ways to control costs. More than 14% of the groups selecting defined contribution products are new, while buy ups of dental and vision plans—which were previously unavailable to small groups—have nearly doubled.

Why payers like defined contribution plans

Meanwhile, HealthLeaders Media's Margaret Dick Tocknell notes that defined contribution plans provide a host of advantages to private payers, among them administrative efficiency. Previously, Highmark's small group business was entirely paper-based and time-consuming. By contrast, the platform in place for defined contribution is entirely electronic.

"Once we input the group information onto the platform we can provide the group administrators with enrollment and payroll reduction reports. An administrator can download a member census whenever they need one," Brown says, adding, "To not have to worry about pushing paperwork saves a lot of time and effort."

The Highmark platform, which was developed by Seattle-based Array Health, also provides the allure of "big data," which could provide the company with a strategic edge, Tocknell writes. "We get tons of information from employees who are shopping on the platform," Brown said, adding that the insurer also collects data from surveys about consumers' product selection and employer contribution.

Finally, ability to compete with government-sponsored health insurance exchanges under the ACA was also a driving factor, Tocknell notes. When first exploring the new defined contribution market, Highmark took care to ensure that the new products would be compliant with the health reform law, Brown acknowledged (Tocknell, HealthLeaders Media, 9/6).

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