As recently as 1992, more workers were covered under defined benefit plans that promised a fixed monthly pension than plans that provided only a defined contribution to a worker's retirement, such as a 401(k). Now nearly three times as many workers rely on defined contribution than defined benefit plans, according to the nonpartisan Employee Benefit Research Institute.
The same trends are affecting employer-provided healthcare. Retirees have felt the shift first. Just 13% of companies still provide health benefits for retirees. And more of those that do are capping the amount they pay for premiums, leaving retirees liable if the cost is greater, the benefit research institute has found.
Similar ideas are limiting employers' contributions to health coverage for active workers. Fewer employers (especially small businesses) are offering it at all. Some restrict coverage to the worker, excluding family members. Others are more explicitly applying the defined contribution approach by promoting health savings accounts. Rather than purchasing conventional insurance, employers under that approach can contribute a fixed sum to an account workers use to pay most of their healthcare costs out of pocket.
These are the models conservatives want to adapt to the public safety net. Bush's Social Security plan would leave most Americans more reliant on the returns from their private investment accounts than the program's guaranteed benefits (which he proposes to reduce significantly from promised levels for all but the poor), according to calculations by Jason Furman, a former Clinton administration official. That would essentially transform Social Security from a defined benefit to a defined contribution plan.
Similarly, Bush has endorsed a plan that would ensure seniors a fixed sum of money to purchase health insurance, rather than the fixed menu of health benefits Medicare now guarantees. Republican Govs. Jeb Bush of Florida and Mark Sanford of South Carolina are likewise pushing to end guaranteed benefits under Medicaid and instead provide poor families a fixed sum to purchase healthcare. Bush is proposing tax credits to promote the move toward health savings accounts for workers.
These ideas raise distinct issues but present common philosophical choices. Like the parallel changes in the private sector, each GOP proposal compels individuals to bear more financial risk. In return, it offers them more choice (about how to invest their retirement money, for instance) and ownership (of assets like individual investment or health savings accounts).
