Booz-Allen Forecasts Trillion-Dollar Opportunity

By Staff Writer

August 14, 2001 at 08:00 PM

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NU Online News Service, Aug. 14, 12:24 p.m. – Booz-Allen & Hamilton, McLean, Va., a consulting firm, says the shift toward "defined contribution" health plans could bring health care benefits and traditional banking and investment services together, and send as much as $1 trillion flowing into individual health accounts each year.

Defined contribution health plans are employer-sponsored health benefits programs that resemble 401(k) defined contribution retirement plans.

An employer-sponsor contributes a specific amount of cash to an individual health account for each participating employee. The employee can use the cash to buy health coverage and pay for other health-related expenses. Most programs let employees keep any cash left in the individual accounts at the end of the year.

Benefits experts say they see few employers rushing to set up defined contribution plans. But Booz-Allen predicts employers could create more than 50 million defined-contribution health accounts over the next 10 years.

The change could transfer as much as $1 trillion from corporate checking accounts and insurance company investment accounts into individual accounts, Booz-Allen says.

Because many individuals will need help managing the accounts, the accounts could represent a significant opportunity for financial advisers and financial services companies, Booz-Allen says.

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