qotd: Fidelity is providing us with incremental reform

Bloomberg Business
January 25, 2016
Retirement Giant Fidelity Now Wants Workers' Health Insurance
By Zachary Tracer

Fidelity Investments is already the U.S.’s No. 2 mutual fund company.
Now, it wants to get bigger in the health insurance business.

The financial services firm is introducing a shopping website for health
insurance and other employee benefits called Fidelity Health
Marketplace. Targeted at businesses with as many as 2,500 workers, the
site, known as a private health exchange, complements Fidelity’s
existing benefits products such as retirement accounts.

The private exchanges set up by companies like Fidelity are separate
from the government-run websites created under the 2010 Patient
Protection and Affordable Care Act. But they share some of the same
features and goals, such as letting customers shop for the best deal by
examining the cost and coverage offered by different health plans. They
can also help limit the cost to employers, by giving workers a set
amount to spend.

In a private exchange, when a worker enrolls in a more expensive plan,
the added expense comes out of their paychecks. If a plan costs less,
the employees can use the extra funds to buy life insurance or other
benefits on the same platform.

It’s a change that echoes the shift from pensions to employee-funded
retirement accounts that happened in the U.S. over the past decades, and
helped give rise to investment management giants like Fidelity.

“What they’re trying to do is move to a model where employers are
defining a contribution amount for employees to use on their
benefits,” according to Mike Trilli, senior health-care analyst at
Aite Group, a research and consulting firm.

Fidelity may also be able to use the health offerings to draw customers
to its investing products, according to Amy Gurchensky, an analyst at
consulting firm NelsonHall. When customers pick a high-deductible health
plan â€" for example, one that pairs a $5,000 deductible with a tax-free
savings and investment account â€" Fidelity will be able to offer its
own investing services.

http://www.bloomberg.com/news/articles/2016-01-26/retirement-giant-fidelity-now-wants-workers-health-insurance

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Comment by Don McCanne

Although a majority of Americans favor a national health program, many
in the policy and political communities express a preference for
incrementally building on the existing multi-payer system, as modified
by the Affordable Care Act (ACA). Although 64 percent of our heath
system is already funded through our taxes, our government gives control
of much of our total spending to the private sector, such as the private
insurance companies. Thus the private sector is the source of much of
the incremental changes that are taking place. Now that Fidelity
Investments is entering the scene, what incremental change are they
offering that will benefit patients?

* Â They are introducing Fidelity Health Marketplace - similar to the
government insurance exchanges under ACA except that they are privately
owned and operated. Since they are targeted at small businesses, they
are an additional intermediary that increases administrative complexity
and expenses. That adds to the cost of the insurance, so that does not
benefit the patient.

* Â The plans will be purchased with a defined contribution from the
employer. Because the contribution is fixed, more of the premium costs
are shifted to the employee, especially over time. Either the employee
must contribute more to the premium, or choose a plan with fewer
benefits, which then increases financial exposure in the event of
medical need. That does not benefit the patient.

* Â Fidelity already offers health savings accounts - savings accounts
that are linked with high deductible health plans and can be used to pay
the deductibles and other cost sharing. Since high deductible plans have
lower premiums which are less likely to exceed the defined contribution,
Fidelity will no doubt heavily market the plans which are linked to
their own health savings accounts. Since employers would use the
Fidelity Marketplace to reduce their own health benefit spending, by
offering a defined contribution, it is likely that employees will have
difficulties keeping their health savings accounts funded. Higher
deductibles linked to an empty savings accounts certainly does not
benefit the patient.

* Â If an employee or family member has an expensive chronic disorder
then a more comprehensive plan should be selected to mitigate the higher
costs. But with the smaller defined contribution, the portion of the
premium that the employee must pay is significantly greater, and often
unaffordable. That does not benefit the patient.

Private sector solutions in health care financing, including insurers
and other fiscal intermediaries, are designed primarily to benefit the
industry, usually at a cost to the patient, though often opaque and thus
deceptive. Public sector solutions, such as Medicare and Medicaid, are
designed to benefit the patient. But even there the private sector has
moved in with their private Medicare Advantage plans and their private
Medicaid managed care programs, to the detriment of patients and taxpayers.

How much more of this private incremental invasion of our already
dysfunctional health care financing system can we take? The next time
you hear a politician say that we need to build on the system we have
through incremental steps, do not remain silent. Say something. Yell, if
necessary. Scream, if that’s what it takes. But do not let them con us
out of the national health program that a clear majority of us want.