Shutdowns, Trend, and a Better Benefits Architecture
When Washington shuts down, it’s a reminder that policy risk can surface at any time—but today’s benefits pressures are not only political. Medical and pharmacy trends remain elevated across both group and individual markets, and employers and advisors have already pulled many levers: tighter vendor management, targeted point solutions, and continual plan tweaks. Despite this, costs keep climbing and traditional tactics are yielding diminishing returns. Finance and HR need structural options that restore predictability and protect employees and retirees.
The shutdown underscores one uncertainty—whether enhanced ACA premium tax credits (PTCs) will extend beyond 2025—but it’s only one factor among other forces like unit cost growth, utilization, specialty drugs, and wage/inflation pressure. Markets will adjust either way. The takeaway isn’t to wait on PTCs; it’s to build a benefits architecture that can absorb policy swings without blowing up budgets or member experience.
A defined contribution (DC) health care approach does exactly that. For active employees, that can mean an Individual Coverage HRA (ICHRA) or, for retirees, a Health Reimbursement Arrangement (HRA). These vehicles carry the defined employer financial support to participants that offsets individual ACA or Medicare options (Medicare Advantage, Medicare Supplement/Medigap, and Part D). DC reframes your obligation from promising a specific group plan to setting predictable allowances tied to business realities. Crucially, DC transfers claims risk to insurers rather than leaving it with the employer. In short, employers no longer have to act as insurance companies when it comes to health benefits. Employees and retirees gain plan choice that can flex with local carrier participation and product design; you gain budget clarity that’s resilient to policy and market shifts.
What to do now:
Model side-by-side scenarios—status-quo group versus DC—through 2026–2028 using your medical/Rx trend assumptions; treat the PTC enhancement as a sensitivity toggle.
Segment populations (pre-65 vs. Medicare-eligible retirees and ICHRA classes) to pinpoint where DC delivers immediate value.
Test market readiness—carrier depth, networks, formularies—and set minimum choice guardrails by location.
Design the transition: allowance strategy and governance, change management and decision support, and tight coordination across Finance (P&L predictability), HR (employee experience), and Communications. With this blueprint, you’re no longer betting your benefits budget on Washington.