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Fidelity Research Reveals Many Insured U.S. Workers Don't Understand Basic Consumer Health Plan Language

Posted on: Tuesday, 16 October 2007, 12:00 CDT

As millions of workers sign up for their benefits during this annual enrollment season, Fidelity Investments today announced the results of new research which examined insured U.S. workers and their readiness to take on more individual responsibility for their health care. The research explored workers' health care planning attitudes and behavior as well as their knowledge of basic health insurance terms and medical savings vehicles.

Although 61 percent of employees surveyed considered their general understanding of health care benefits terminology to be very good, the study revealed that in fact only one-in-seven workers (15 percent) had a very strong understanding of key terms. While nearly nine out of 10 workers (87 percent) were able to identify what a "co-payment" was, only half of the respondents were able to identify a flexible spending account (FSA) or a health reimbursement account (HRA), two tax-advantaged medical account vehicles available through employers today. Additionally, more than half (56 percent) of the respondents also could not correctly identify a Health Savings Account (HSA).

"As responsibility for financing health care continues to shift to the individual, employers will play a critical role in helping workers to understand all of their plan options, which increasingly will include new and more complex designs that are relatively unfamiliar to most Americans today," said Patrick F. Goepel, president of Human Resources Services for Fidelity Investments.

Cost of Premiums Ranks as the Leading Factor in Choosing Health Plans

When asked to identify the three most important factors in choosing health insurance coverage, 39 percent of respondents said the cost of monthly premiums was a leading factor in making their decision. Premiums were followed by the amount of co-pay and co-insurance for doctor visits (29 percent), ability to access specific doctors (29 percent), annual deductible amounts (20 percent) and prescription coverage (20 percent). Among the least important factors were access to health education, health promotion and prevention, with just one percent of workers indicating these were important factors in choosing a plan.

Workers Dissatisfied with Current Health Plan Most Likely to Express Interest in CDHP

Most workers (74 percent) without access to a consumer-driven health plan (CDHP) expressed no interest in having access. Even among workers who indicated that the cost of monthly premiums was a key factor in choosing their health plan, seven out of 10 (71 percent) said they were not interested in a CDHP. A significant number (21 percent) of workers don't know if their employer offers a high deductible health plan option, the type of health insurance plan most associated with a consumer-driven health plan that generally offers lower monthly premiums. The 24 percent of workers who did indicate interest in a CDHP were less likely to be very satisfied with their current health plan. This group was also younger with a higher level of education.

"It's a bit of a contradiction to hear workers say that premiums are the most important factor in choosing a plan, yet they express little interest in consumer-driven health plans, which can be far more cost effective for many Americans," said Goepel. "It is critical that workers start to recognize their long-term personal health care liability and make smart decisions today in selecting an appropriate plan that could help provide greater retirement savings to cover future health care needs."

Most Don't Plan for Future Health Care Costs

The survey also showed that most insured workers (68 percent) have not tried to calculate their expected health care costs in retirement. Less than 10 percent reported having carefully estimated the amount of savings required to cover health care expenses in retirement. Additionally, workers today overwhelmingly underestimate the cost of health care in retirement. When workers were asked to estimate how much a typical couple, retiring today at age 65 would need to cover out-of-pocket health care costs in retirement, the median answer given was $100,000, far less than Fidelity's projected $215,000. Meanwhile, half (51 percent) of workers say they plan to offset health care costs in retirement by taking better care of themselves.

As workers get greater access to consumer-driven health care plans that incorporate tax advantaged savings vehicles, they have the opportunity to make better health care funding and savings decisions that can help them finance the lifestyle they aspire to in retirement.

About the Research

The survey was conducted by Abt Associates of Cambridge, Mass., on behalf of Fidelity Investments in April 2007. The survey was administered online among 1,005 employed, insured workers at least 25 years old, earning at least $20,000 in household income, and who identified themselves as being at least "somewhat" familiar with their household's primary health insurance plan and being involved in health care decision-making.

About Fidelity Human Resources Services

Fidelity Human Resources Services is a business unit of Fidelity Investments that provides comprehensive human resources outsourcing administration and services to large, mid-sized and small employers in the U.S. and elsewhere around the world. Serving employers and employees worldwide, HR Services provides a broad array of services, including human resources, payroll, talent management, recruitment, consulting, and comprehensive benefit management services.

About Fidelity Investments

Fidelity Investments is one of the world's largest providers of financial services, with custodied assets of $3.3 trillion, including managed assets of more than $1.5 trillion as of September 30, 2007. Fidelity offers investment management, retirement planning, brokerage, and human resources and benefits outsourcing services to more than 23 million individuals and institutions as well as through 5,500 financial intermediary firms. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, the largest mutual fund supermarket and a leading online brokerage firm. For more information about Fidelity Investments, visit www.fidelity.com.

Brokerage products and services are offered through Fidelity Brokerage Services LLC, Member NYSE, SIPC.

Workplace retirement savings plans provided by Fidelity Investments Institutional Services Company,Inc., 82 Devonshire St., Boston, MA 02109 through December 31, 2007 and provided by Fidelity Brokerage Services LLC, Member NYSE, SIPC, 100 Summer Street, Boston, MA 02110 on or after January 1, 2008.

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Source: Business Wire

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