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1、Rich Bailey FSA, MAAA, FCA Richmond, VA,Is it Time for Employers to Move Away From the Traditional Ways of Providing Employee Benefits?,November 3, 2004,1,Agenda,The Environment The Catch-22 Paths Away from Traditional Delivery: Two Camps Opportunities Along Path 2 The Answer Additional Topics,2,Age
2、nda,The Environment Medical Trends Legislation Marketplace Changes Population Demographics Employer Outlook The Catch-22 Paths Away from Traditional Delivery: Two Camps Opportunities Along Path 2 The Answer Additional Topics,3,Double-Digit Increase for Second Year in a Row Per employee costs in exce
3、ss of $5,600 per year,4,Annual CPI Trend U.S. health care costs rise, despite continuing economic recession,The gap between CPI-U and medical care component is increasing,5,Comparison of Overall Growth Cumulative medical care CPI 89% greater than overall CPI since 1967,Data based on January 1 CPI va
4、lues,6,Employers Cost Increases Out-Pace Other Indicators Largest increase since 1990 (all employers),7,Aggregate Health Care Spending (1980 2010) Government portion of payments increasing; total projected to be over $2 trillion by 2009,Source: CMS,8,Medical Trends,Pop Quiz How many years will it ta
5、ke gross medical costs to double, assuming no specific employer interventions or national health care? 10 or more 9 8 7 6 5 or fewer,9,Medical Trends Responses from a group of 25 actuaries who had time to get their calculators,10,Legislation,Medicare Prescription Drugs If made into law, will have ma
6、jor impact on retiree benefits and strategies Initial confusion aside, should have positive impact on retiree plans Expect cost shifting to negatively impact active plans EEOC Proposed changes in ADEA regulations Cline vs. General Dynamics Wells Fargo case Appears to allow pre-funding (and tax-deduc
7、tibility) of entire retiree liability an ILP approach wont be exactly same number as FAS liability funding in years 2+ would be limited to service cost IRS weighing its options,11,Proposals to Increase Coverage Among Early Retirees Few government programs except for financially indigent,COBRA extens
8、ions and/or Medicare buy-ins Prohibitions on post-retirement benefit reductions Expanded pre-funding for retiree medical,Still few viable products for pre-65 in individual market that overcome access and affordability issues.,12,ADEA Issues Impact on retiree medical coverage,Age Discrimination in Em
9、ployment Act (ADEA) prohibits discrimination against persons age 40 or older in terms and conditions of employment Age-based distinctions in employee benefit plans are permissible only if: A specific statutory exception applies, or Equal benefit/equal cost test is satisfied Plan must provide equal b
10、enefits for older and younger workers, or Plan must incur equal costs for older and younger workers Third and Sixth Circuit Courts reach different conclusions EEOC reviewing ADEA regulations,13,Marketplace Changes Consolidation of Major Health Care Carriers Employer options are greatly reduced, carr
11、iers have more clout,14,Marketplace Changes PBM consolidation continues; three major national PBMs remain,15,Population Trends Aging baby boomers will increase the elderly and near elderly populations,16,Negative Tidal Wave of Available Talent Pool of “prime workers” will be decreasing,17,Impact of
12、Demographics on Health Care Cost Cost increases with age,18,Health Deterioration A cause and a consequence,We eat too much - 64.5% of adults overweight,Population with diabetes increased over 50% in last decade,*Overweight is roughly 10 to 30 pounds over an ideal weight. Obesity is roughly 30 pounds
13、 over an ideal weight Source: National Health and Nutrition Examination Survey,45.0%,47.0%,47.0%,56.0%,64.5%,19,Issues Facing Businesses The perfect storm,Low ambient inflation; high medical inflation Advances in medical technology likely to lead to higher costs, difficult decisions Legislative unce
14、rtainty Consolidating medical delivery and financing system An aging workforce Increased longevity Slowing economy Disappearing over-funded pension plans Few, if any, obvious and easy alternatives to managing health care costs,20,Employer Outlook,Environmental outlook spurring employer action Employ
15、ers acutely aware of trends Heightened interest in cost saving strategies (active and retiree) Greater emphasis on longer term cost projections and on the “bottom line” Projection results have induced “fight or flight” responses,21,Retiree Medical Coverage Employers continue to drop retiree medical
16、coverage,22,Agenda,The Environment The Catch-22 Paths Away from Traditional Delivery: Two Camps Opportunities Along Path 2 The Answer Additional Topics,23,The Catch-22,Reducing employer cost typically implies increasing employee/retiree cost Eventually runs against employers sensibilities regarding
17、fairness, paternalism (if present), and the concept of benefits generally Example (FAS 106): “Lower my liabilities significantly but dont do anything harsh to our retireesthey wont accept it” To the extent that retirees represent the bulk of the liability, this is a very difficult proposition Opportunities exist to change eligibility, design , etc. for future retirees If we dont take cost out of the system, either the employer or the employees/retirees will pay the increases,
