update on consumer directed health fidelity human resources services company october 5, 2004
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Update on Consumer Directed Health
Fidelity Human Resources Services Company
October 5, 2004
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© 2004 Fidelity Human Resources Services Company 2
Health & Welfare Consulting
Early HSA growth may come through consumer-directed plans
Relative market share among health plan products
(percentages may not total 100 because of rounding)
Source: Forrester Research, July 2003
3%7%
12%19%
24%
8% 7% 4% 4% 4% 4% 4%4%
4%
4%
4%41%
48% 52% 52% 52% 51% 49%47%
43%
38%35%
22%
22% 18% 18% 18% 18% 18% 17% 16% 15%13%
29%23% 26% 26% 26% 26% 26% 26% 25% 25% 24%
1% 2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
HMO
POS
PPO
Conventional
Consumer DirectedHealth Plans
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© 2004 Fidelity Human Resources Services Company 3
Health & Welfare Consulting
Humana is reporting favorable utilization trends for their CDHP product
SmartSuite 7/02 to 7/03 (Humana Product) Utilization vs. Market Change
Source: Early Experience with Consumer Centric Health Plans, Testimony to the Joint Economic Committee of the US Senate,John M. Bertko, FSA., MAAA, February 2004
Preventive Services in SmartSuite increased by 14% over the prior year
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© 2004 Fidelity Human Resources Services Company 4
Health & Welfare Consulting
More Employers are Offering HDHPs as a plan option
Source: Kaiser Family Foundation and Health Research and Educational Trust Survey of Employer-Sponsored Health Benefits: 2003, 2004.
Percentage of Firms Offering Employees a HDHP
27% of all employers surveyed report that they are “very likely” or “somewhat likely” to offer a personal or health savings account option in the next two years
5% 5% 5%
17%
5%
10%
7%
9%
20%
10%
0%
5%
10%
15%
20%
25%
All Small Firms (3-199)
Midsize Firms (200-299)
Large Firms (1,000-4,999)
Jumbo Firms (5,000or More)
All Firms
2003
2004
3.5% offer a personal or Health Savings Account Option along side the HDHP
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© 2004 Fidelity Human Resources Services Company 5
Health & Welfare Consulting
The social cost and future value of retiree healthcare are not aligned
Social Programs
Healthy Birth Primary and Secondary Education
Higher Education & Job Training
Active Healthcare
Retiree Healthcare
Future Value Index
0.0
1.0
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© 2004 Fidelity Human Resources Services Company 6
Health & Welfare Consulting
Projected Employer Benefit Costs
$1,250 $2,100 $1,900
$37,000$41,420
$3,265 $4,529 $4,098
$79,794
$5,600
Medical Dental, Life,Disability
DB DC Salary
2004
2030
Assumes 5% Trend
Assumes 8% Trend
$19,912
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© 2004 Fidelity Human Resources Services Company 7
Health & Welfare Consulting
Financial Security Risk for Employees
When employees retire without medical insurance,
their personal risk dramatically increases
Employee Risk
Age
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© 2004 Fidelity Human Resources Services Company 8
Health & Welfare Consulting
No FundingFor Retiree
Medical Plan
More Discretionary
Spending
ComprehensivePlan
FundingFor Retiree
Medical Plan
LessDiscretionary
SpendingHDHP ?
Tradeoffs Will Benefit Employees
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© 2004 Fidelity Human Resources Services Company 9
Health & Welfare Consulting
Framework for Constructing an Alternative Program
Guiding Principles:
Pay Equity
Tax Efficiency
Flexibility
Productivity
Transparency
Limit Complexity
Old
Pro
mis
es
Market Pressures
Leg
al Co
nstrain
ts