Insuring the employee’s risk


Insuring the employee’s risk

The benefit gambit currently in vogue is a new kind of risk-transfer. Instead of having the employer assume the employee’s long term risk (by defined benefit pensions, and by comprehensive health benefits), the name of the game now seems to be: transfer the risk to the employee. How? First, by giving the employee a defined contribution 401(k) and letting the employee take the risk that it might not be sufficient for retirement; and second, by designing a health benefit plan where large components of the risk of health costs are transferred back to the employee, and giving the employee a Health Savings Account that may or may not be sufficient to cover that risk. And so on.

What about insurance of these risks? Where are the new insurance products (protection for employee’s medical “HSA-Gap”? Employees’ 401(k) inflation protection?) designed to absorb and mutualize the employees’ cost of these risks? Why not provide that kind of insurance to employees, but through employers, on a group basis purchasable by employees through their own § 125 cafeteria?

This is a market in need of new insurance products. The insurers have a well-established but perhaps obsolete habit of “selling” group products primarily to employers, designed to save money for employers and reduce the employer’s risk. What new safe harbors or other law changes are needed to facilitate an insurance industry effort to reduce employees’ risks? What new “suitability” issues are involved? Surely the need is there, and the need should make the market.