Fidelity is providing us with incremental reform

Retirement Giant Fidelity Now Wants Workers' Health Insurance

By Zachary Tracer
Bloomberg Business, January 25, 2016

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 — for example, one that pairs a $5,000 deductible with a tax-free savings and investment account — Fidelity will be able to offer its own investing services.



By Don McCanne, M.D.

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?

*  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.

*  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.

*  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.

*  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.