BOSTON, November 3, 2005 - Annual benefits enrollment season may look very different to employees this fall, with almost half (45%) of large employers surveyed planning to offer a consumer-driven health plan (CDHP) in 2006, a trend gaining popularity as companies try to cope with ever-increasing health care costs, according to a Fidelity Investments study¹.

Consumer-driven health plans - intended to give people more choice, flexibility and control over their health care spending - are expected to garner higher participation rates this year as more employers overhaul their entire benefits strategy and position CDHPs more competitively with other health plan offerings. Of the 45 percent of surveyed employers who plan to offer a CDHP next year, nearly all will position the plan as a choice instead of a full replacement for more traditionally offered health plans.

"Our survey results suggest employers are becoming increasingly committed to CDHPs as a way to address health care cost issues, a development that should help drive employee participation rates even higher this year than last," said Marc Hallee, senior vice president of health and welfare consulting for Fidelity Human Resources Services Company. "In our 2005 Health Benefits and Behavior Study² , we not only saw CDHP participation rates rise significantly, but more importantly, we saw re-enrollment rates reach 95 percent, the highest observed across all types of health plans. This indicates a very high level of employee satisfaction with CDHPs," continued Hallee.

CDHP Plan Designs

In terms of plan design, all of the surveyed employers offering a CDHP option in 2006 said they would couple their CDHP with a personal health account, such as a health savings account (HSA) or health reimbursement arrangement (HRA), to help employees offset their growing share of health care costs. Out of the two types of accounts, HSAs proved to be the more popular option, with 62 percent of employers choosing to offer one, and 38 percent opting for the more traditional health reimbursement arrangement (HRA). While HSAs and HRAs differ significantly in terms of funding rules and portability, they both offer employees an opportunity to pay for qualified medical expenses with tax-advantaged funds and allow unused funds to remain in the account from year to year to pay for future qualified medical expenses.

When asked about underlying medical plan details, 82 percent of survey respondents offering a CDHP next year indicated they would employ a high-deductible health plan (HDHP) using a preferred provider organization (PPO). The median deductibles for these plans will be $1,500 for single coverage and $3,000 for family coverage. After the deductible, the plans will typically pay 85 percent of eligible medical claims until participants have met the out-of-pocket maximum. According to employer responses, the median out-of-pocket maximum for CDHPs will be $2,875 for single coverage and $6,000 for families.

"While it's clear most surveyed employers are designing their CDHPs with financial incentives to drive participation, the ultimate success of the plans will depend more on how committed employers are to providing their employees with sustained education support, as well as cost and quality transparency around health care providers," said Hallee. "These are the true keys to helping employees become wiser consumers of health care, which is the real desired effect of these new plan designs."

CDHP Employer Funding

While the amount varied, 85 percent of surveyed employers who plan to offer a CDHP option said they were committed to providing some level of funding to help offset employee benefit costs through an HSA or HRA. Results showed the median planned funding for HSAs per year is $500 for single coverage and $1,000 for family coverage. For HRAs, the median employer contribution will be $750 per year for single coverage and $2,000 for family coverage. Those employers planning not to contribute to the employee portion of benefits costs will offer HSAs.

CDHP Projected Costs

Surveyed employers projected considerably lower costs for CDHP family coverage relative to more traditional health plan offerings in 2006, with the average CDHP expected to cost $875 per month compared to $936 per month for non-CDHPs. However, cost savings for single coverage CDHPs is expected to be less significant, with average costs projected at $302 per month, while more traditional health plans are expected to cost $319 per month. Employee contributions toward CDHPs compared to traditional health plans seem to correspond to employer cost differences consistently, with the average CDHP costing employees $58 per month for single coverage and $187 per month for family coverage. The average employee cost for non-CDHPs is projected at $68 per month for single coverage and $204 per month for family coverage.

"When you look behind the averages, it's evident that many employers will charge significantly less for their CDHP option than they will for more traditional health plan offerings," continued Hallee. "But while these lower contribution rates may provide good incentive for employees to consider CDHPs, employers should carefully monitor their plan's performance to ensure it is achieving its intended benefits."

About Fidelity Employer Services Company

Fidelity Employer Services Company provides benefits and human resources administration, workforce effectiveness, payroll solutions and stock plan services to approximately 20 million employees in the U.S. as of September 30, 2005.

About Fidelity

Fidelity Investments is one of the world's largest providers of financial services, with custodied assets of $2.3 trillion, including managed assets of $1.1 trillion as of September 30, 2005. Fidelity offers investment management, retirement planning, brokerage, human resources and benefits outsourcing services to more than 20 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, one of the largest mutual fund supermarkets and a leading online brokerage firm. For more information about Fidelity Investments, visit www.fidelity.com.

¹Fidelity Investments conducted an online survey, gathering responses from 86 large employers across all major industries with more than 2,000 employees from August 20 - Septmber 6, 2005.

²The Fidelity Health Benefits and Behavior Study 2005 is based on analysis of Annual Enrollment data of Fidelity clients and is the second consecutive study of its kind. It was conducted over the winter of 2004-2005, evaluating 2005 health insurance enrollments of more than 700,000 employees in plans record kept by Fidelity Human Resources Services Company's Health and Welfare business. Unless otherwise noted, enrollees in these plans are active. Additional methodology and terminology is available in the full study.

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Fidelity Employer Services Company LLC
Institutional retirement products and services are offered by Fidelity Investments Institutional
Services Company, Inc., 82 Devonshire Street, Boston, MA 02109