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Law firms are first to drop the group health plan

a lawyer's guide to health insurance book

Law firms changing healthcare strategy  

New health care reform rules have caused many industry insiders to predict that employers will
drop their group health plans in favor of helping their employees get and pay for individual coverage. Instead of focusing their health benefit on a particular plan or carrier, these employers will focus on the money and support they give employees to help them get individual health insurance.

This new strategy, defined contribution, is one that law firms are among the first to adopt. Why? Ultimately they are doing it because it is better for the firm and the employees. But while defined contribution can be better for all types of employers, law firms especially are finding it to be better for them. Here are six reasons:

• Lawyers can’t be discriminated against with defined contribution. Historically, law firms were charged more in the group market simply for being law firms. Why? Carriers felt they had evidence that employees at law firms were higher users of health care, and so generally charged law firms more across the board. This can’t happen in the individual market. In the individual market, insurance companies can ask applicants for only their ZIP code, smoking habits and age.

• Tax incentives. Employers offer group health plans in large part because employees can receive health benefits tax-free from their employer. One drawback of defined contribution is that any employer reimbursement for health insurance would be post-tax. For the highest-paid employees at an organization, that is a big drawback. Partners at law firms, however, generally already have to pay their health insurance premiums with post-tax dollars. So, what is a drawback at many employers is closer to a wash at law firms.

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