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Is it Time for Employers to Move Away From the Traditional Ways of Providing Employee Benefits?  November 3, 2004 Agenda The Environment The Catch-22 Paths Away from Traditional Delivery: Two Camps Opportunities Along Path 2 The Answer Additional Topics Agenda 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 Double-Digit Increase for Second Year in a RowPer employee costs in excess of $5,600 per year Annual CPI Trend U.S. health care costs rise, despite continuing economic recession Comparison of Overall Growth Cumulative medical care CPI 89% greater than overall CPI since 1967 Employers’ Cost Increases Out-Pace Other Indicators Largest increase since 1990 (all employers) Aggregate Health Care Spending (1980 – 2010) Government portion of payments increasing; total projected to be over $2 trillion by 2009 Medical Trends Pop Quiz How many years will it take gross medical costs to double, assuming no specific employer interventions or national health care? 10 or more 9 8 7 6 5 or fewer Medical TrendsResponses from a group of 25 actuaries who had time to get their calculators Legislation Medicare Prescription Drugs If made into law, will have major 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-deductibility) of entire retiree liability an ILP approach won’t be exactly same number as FAS liability funding in years 2+ would be limited to service cost IRS weighing its options Proposals to Increase Coverage Among Early RetireesFew government programs except for financially indigent COBRA extensions and/or Medicare buy-ins Prohibitions on post-retirement