Wieffering: In health insurance, choice doesn't come free

Some day in the not-too-distant future the company-sponsored health plan will be as rare as the company-funded pension.

Whether you think this is a good development or a terrible one doesn't really matter. The 401(k) approach to health insurance is on its way.

The latest marker on this road was laid down earlier this week, when WellPoint Inc., the largest U.S. insurer by enrollment, and two Blue Cross nonprofits bought a majority stake in Minneapolis start-up Bloom Health. Their goal is to create a nationwide private health insurance exchange, a place where employers can direct their workers to shop for health plans that fit their specific needs and budgets.

The impetus for this purchase is the 2010 passage of the Affordable Care Act, which allows for the creation of state-owned exchanges. But the momentum for exchanges has been building for years. Indeed, Republican John McCain campaigned for president in 2008 on a platform that included a version of health care exchanges.

The public exchanges that debut in 2014 will initially be limited to uninsured individuals and people working at companies with 50 or fewer employees. But big companies, desperate for ways to limit their exposure to soaring health care costs, want in on exchanges, too.

Because they provide a true alternative to employer-based coverage, "exchanges change the playing field," said Paul Fronstin, a senior research association with the Employee Benefits Research Institute.

In the United States, about 59 percent of nonelderly individuals are covered by an employment-based health plan. For most of us, it works the same way: Each year we sign up with a health plan chosen by our employer. Monthly premiums vary depending on whether the coverage is for an individual or a family, but the benefits are the same.

Proponents of exchanges like to market the defined contribution approach to health care insurance as ending the "one-size-fits-all approach" to health insurance and freeing people from the burden of having to pay for more insurance than they need.

Nonsense. It's true that having consumers buy directly from plans has the potential to slow cost increases, but that will depend on their having the tools and information necessary to make informed choices.

This is really the latest iteration of the decades-long process of shifting the cost of health care from your boss' balance sheet to yours.

Health insurance used to be about pooling risk and sharing costs to keep premiums as low as possible for everyone. The defined contribution/exchange model segregates risk and prices it accordingly. You pay for the insurance you think you need. Of course, if you end up needing more than you paid for, the risk and cost are yours.

And who can blame U.S. companies for wanting to shift a higher portion of health care costs to employees and their dependents? They compete against global firms that don't have to worry about this cost because their governments provide national health service plans.

Fronstin is somewhat skeptical of that happening, given that companies have been voluntarily providing health benefits for 60 or 70 years, in part because they are seen as a valuable tool in recruiting and retaining workers. But he admits, "If one employer does it in 2014 we could see 10 do it the next year and 50 the next," he said. "The question is not how many will, but what will one trigger?"

Of course, there are a lot of unknowns in the exchange model, particularly around the employer contribution. Under the Affordable Care Act, any company with more than 50 employees will be fined it if does not offer insurance coverage, but how will "offer" be defined? Current government data shows that private sector employers pay an average of 70 percent of an employee's monthly premium. Will they continue to do so once they move employees to an exchange?

Hard to believe, but employees may one day think of these as the good old days.