Here's an example: An employee with a family of four earning $35,000 a year can only be asked to pay 4.4 percent of their personal income, which would be around $1,540 a year. The current family premiums for group insurance average close to $17,000 a year meaning the employer would have to be willing to pay $15,460 of the annual premium for it to be deemed "affordable" for the employee. Most employers will opt for the $2,000 penalty by choice or necessity.

If the "stick" outlined above wasn't enough to encourage employers to drop group coverage the "carrot" should be enough to push them over the edge. I am referring to the subsidies the government will make available to anyone not offered coverage at work and making less than 400 percent of the federal poverty level. In addition to the subsidies there will be no restrictions on pre-existing conditions, which will ensure that everyone can find coverage.

Of course, the bill also tries to provide incentive for an employer to keep group plans in place. For groups with fewer than 50 employees there is no penalty for not offering coverage but for groups with more than 50 employees there is a penalty of $2,000 per employee. We have already seen documents and internal e-mails of several large companies weighing the pros and cons of dropping their group coverage. So, is the demise of group insurance imminent? Without significant changes in the bill the evidence points to yes.

So, if it is the end of group insurance, is that a bad thing? I am certainly not suggesting that a single payer or government-run plan is the answer but there are many flaws to our current system. In order to understand them we have to understand where this system came from and why employers offer insurance in the first place.

The reason employers offer benefits is to attract and retain good employees. This is typically part of the overall compensation package offered to employees. It started at the end of World War II when the government instituted wage and price controls. As a way around this and to continue to attract and retain the best employees employers went to the insurance carriers and offered to pay for their employees' plans as a group. Congress allowed any money the employer paid and any money withheld to pay premiums to be done on a pre-tax basis.

A lot has changed in the 60-plus years since this system was implemented that make it obsolete – the most obvious being that we don't have wage controls and can now attract and retain good employees the old fashioned way.

A few of the other flaws:

• Mandates – Federal- and state-mandated coverage adds to the premiums every year with most states now having more than 50 mandates (for example, maternity coverage)
• Lack of Portability – The employer owns the plan not the employee and most employees don't stay with one job for 30 years like they used to
• Small group is an oxymoron – Rule number one in insurance school is the law of large numbers. Can you really spread the risk of potentially huge medical bills affordably with in a small group? The answer is no.

Clearly the current system is flawed and on its way out. What is the alternative? Government-run health care? Certainly not. The best solution would be a defined contribution approach for employers. This approach allows employers to define an amount of money that can be used tax free for any medical purposes including premiums for health plans that the employee would own. This approach has actually been promoted by the AMA for more than 12 years.

We are at a crossroads very similar to the one businesses faced more than 30 years ago when they realized their pension plans were going to bankrupt them. Actuarially they could not continue to offer cost of living for life on these defined benefit plans. They made the shift to 401(k) or defined contribution plans. A similar shift needs to happen for our health insurance to sustain the profitability of our businesses and the greatest health care system in the world. Defined contribution could be the solution.