Since the advent of the health care reform law, more
and more employers who offer health insurance to over 65’s are turning to
private exchanges to provide individual coverage, often at a lower cost than
previous plans.
According to a
Kaiser Family Foundation Health Research & Educational Trust survey from
2014, the number of companies with over 200 employees who offer retiree health
coverage dropped from 66% in 1988 to 28% in 2013. And while currently 29% of
employers are utilizing the benefits of private health exchanges to offer their
post-65 retirees continued health coverage, another 27% of companies are
seriously considering the move, with 44% already evaluating the impact of such
a change, as stated in a further survey of 424 public and private sponsors
representing a total of 3.8 million retirees.
The growing trend of
over 65’s retiree migration to private exchanges is fueled in part by the
Affordable Care Act, partly by the elimination of the tax-favored status of
retiree drug subsidy, and lastly by improvements in the Medicare Part D
program, which aims to fill the so-called ‘donut hole’ by 2020.
Connecticut-based John Grosso, actuary, and leader of Aon Hewitt’s task
force for retiree health is convinced that individual coverage has become more
cost effective in the post ACA market, while at the same time, retiree benefit
values remain preserved. And Eric Stranger, Principal of Health Exchange
Solutions at Buck Consultants in Rhode Island believes the trend is set to grow
stronger in the near future.
“Most employers that provide group health benefits to
post-65 retirees are at the very least evaluating whether an exchange would
work for them and their retirees,” said Stranger, and added, ““We’re not
looking at first movers anymore. The level of activity we’re seeing from
employers has increased almost exponentially every year.”
One successful example of the trend can be seen in Georgia. Postal giant
United Parcel Service (UPS) recently moved 17,000 of its post-65 non-union
retirees and their spouses to the private exchange at Aon Hewitt, where,
depending on their location, the retirees have a choice of around thirty-six
plans, ample enough to find the best available plan for each individual.
““We had a lot of feedback before from our retirees
that there wasn’t much value to our existing plan,” said BJ Dorfman,
Atlanta-based Director of US Benefits. “It was secondary to Medicare and didn’t
pay unless they hit a $1,000 out-of-pocket maximum. So from a design
standpoint, the fact that they could pick their own plan and they had more
choice — it was really appealing to them.”
While United Parcel’s move proved highly beneficial for retirees, the
company itself experienced no change in health care costs. Not so for the
Alameda County Employees Association. The organization based in Oakland,
California, cut its costs by an astonishing 50% when it moved 1,300 post-65
retirees to the Extend Health Inc exchange in 2013. The move provided retirees
with access to 55 different carriers and 214 different plans.
Despite the obvious
benefits, the move to a private exchange can be quite confusing for retirees.
Most will have little or no experience of the health insurance marketplace.
Which is why platforms like Benistar have dedicated customer
service representatives to guide and support post-65 retirees throughout the
entire moving process.
Moving to a private exchange makes sense for a lot of reasons. “Your retiree group typically is getting smaller, older and sicker,” says John Barkett, Director of Health Policy Affairs at Towers Watson, in Arlington, Virginia. The main reason post-65 retiree coverage purchased from an exchange is cheaper than an employer plan is that they have the capability and the resources to spread the risks further.
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