Going To Extremes

Sometimes experts don't know what's best.

Several years ago, some industry experts proposed plans in which employers would gross up employees' pay by the amount they currently were spending on health-care costs, and employees would be on their own to find the plans that fit their needs. Typically, the amount of the gross-up would be several thousand dollars per employee. That version of defined-contribution health-care didn't get very far. For one thing, grossing up employees' pay also would boost their taxable income. More importantly, the U.S. health-care system isn't set up to easily accommodate solo purchasers. "The individual marketplace, in most states, is such an ugly thing," says Scott Keyes, a Minneapolis-based senior consultant with Watson Wyatt & Co., Washington, D.C. Individuals with chronic conditions, such as diabetes, could see premiums double or triple if they tried to obtain coverage on their own, he says.

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