The steady deterioration of health care benefits for retirees is accelerating under health care reform as employers begin sending retired workers to private insurance exchanges for coverage.
The Affordable Care Act “has made retiree coverage more expensive for employers,” said Steve Wojcik, vice president of public policy for the National Business Group on Health in Washington, D.C. “That’s one of the hidden realities of the ACA.” He said that health care reform “is making profound changes” in the retiree health landscape.
In September, IBM Corp. and Time Warner Inc. announced that they are moving retired workers to a private health insurance exchange, giving them money to buy their own coverage. Starting Jan. 1, 2014, the companies’ Medicare-eligible retirees will purchase health insurance through Extend Health, a private exchange owned by consulting firm Towers Watson & Co. The Utah-based company has signed up about 300 employers, including Caterpillar Inc. and DuPont.
More than 60 percent of employers are re-evaluating their long-term retiree health strategies because of health care reform, according to a recent Aon Hewitt survey of 548 companies. And of those firms that have decided to make changes for Medicare-eligible retirees, more than 40 percent will move them to a private insurance exchange. But it doesn’t mean that employers “are throwing retirees to the wolves,” according to the survey, which shows that 66 percent of companies plan to provide expert guidance to retirees shopping for coverage on an exchange.
Aon Hewitt runs two corporate health exchanges, one for active employees and one for Medicare-eligible retirees called Aon Hewitt Navigators, which serves about 50 employers, according to a company spokesman.
“Until now most retirees only had to worry about a couple of health care options,” said John Grosso, head of Aon Hewitt’s retiree health task force. “Now employers are explaining that there are a wide variety of options in a post-reform environment that could be a better fit. There are many more choices in plans, greater competition and federal subsidies to offset costs. Most employers are looking to preserve the value of their benefits. It’s a change, but it doesn’t have to be for the worst.”
But communicating these changes to retirees is a challenge.
“Employers going in this direction are embarking on a fairly comprehensive communication strategy,” Grosso said. “They are giving employees far more choice in designs, premiums than are available in a group plan structure. They need to explain the merits of the subsidies and the flexibility to be had in an exchange. There needs to be communication before, during and after enrollment.”
While retiree health benefits for new hires are becoming a thing of the past, longtime retirees are not likely to see any changes to their coverage, Wojcik said.
“That’s the last group of people employers want to make changes for,” he said. “The longer you’ve been retired and the longer you’ve been on the plan, the less likely your former employer will change your coverage. It’s much easier for an employer to eliminate retiree health benefits for new hires. For those close to retirement it’s a little harder, but easier than changing it for retired employees.”