Offering 21st Century Health Benefits makes employees happy . . . and saves everyone money!
The term “21st Century Health Benefits” is used to define a health insurance strategy that employs tools developed in the 21st Century—or after the year 2000. There are two elements:
- A Consumer Directed Health Plan (2004). This newer health insurance strategy couples an affordable high deductible health plan (HDHP) for big medical expenses with a tax-advantaged health savings account to pay for routine and expected medical expenses. An employer can build the insurance program around a Consumer Directed Health Plan such as a bronze HSA-Qualified health plan, and then offer one or more traditional plans as options for those who do not want an HSA-based plan. (Note: when offered by employers, this kind of plan can also be called an “Employee Directed Health Plan.”)
- “Hybrid Financing” (2008). Using this method to determine employer contribution combines the best features of “defined benefit” and “defined contribution” to provide the most equitable funding for both younger and older employees. In the past employers determined their contribution as either a percentage of a health plan premium (called defined benefit) or a monthly cash amount that could be used to pay premiums (called defined contribution). With Hybrid Financing, the employer makes splits contribution, with part of it as a defined benefit and part as a defined contribution. Read below to learn why Hybrid Financing is more equitable than either defined benefit or defined contribution.
- Learn more about Hybrid Financing here.
Rationale for Change
Historically, most people are quite healthy while a very small number have expensive, ongoing medical conditions.
- 5% of the population is responsible for 50% of healthcare spending. The top 1% accounted for 20% of spending. (Source: https://www.theatlantic.com/business/archive/2012/01/5-of-americans-made-up-50-of-us-health-care-spending/251402/)
- 75% of claims are due to five conditions: diabetes, congestive heart failure, coronary artery disease, depression, and asthma
- Healthy people spend very little on healthcare. The healthiest 50% are responsible for only 3% of healthcare spending.
- 73% spend less than $500/year:
Money spent on medical care annually |
Percentage of U.S. Population |
| $0 = no medical expenses | 33% |
| $1-$500 | 40% |
For the majority of employees who infrequently access the healthcare system, they will no longer have to pay an additional premium for copays they rarely use. Instead they can save that money in an HSA for future expenses. Every employees gets a plan that fits their needs.