Exchanges Could Alter the Dynamics of Health Care in America
Some large employers are transitioning Medicare-eligible retirees from legacy group health insurance plans to basic Medicare and a health insurance exchange.
Before last year’s passage of the Patient Protection and Affordable Care Act, few people had heard of health insurance exchanges. In just 30 months, they will most likely be a central component of America’s health care system.
The good news for large employers is that health insurance exchanges are already available for their Medicare-eligible retirees.
Large private-sector employers have struggled for decades with the rising cost of health benefits for retirees. The problem intensified Jan. 1 as the oldest baby boomers began turning 65. According to Pew Research Center population projections, roughly 10,000 boomers will turn 65 every day—for the next 19 years. By 2030, when the last of the boomers turn 65, 18 percent of the U.S. population will be 65 or older, up from 13 percent today.
Even before boomers started hitting retirement age, some employers were getting relief from the rising cost of retiree health benefits by discontinuing them altogether. Others found a better way: They transitioned their Medicare-eligible retirees from legacy group health insurance plans to basic Medicare and a health insurance exchange where they can purchase private Medicare supplement plans that extend and cover gaps in basic Medicare coverage.
Many of those are going a step further and establishing health reimbursement arrangements and funding them with a defined contribution each year. In this way, companies can provide health benefits to retirees while managing costs, and retirees can purchase the private Medicare plans that are right for them at a price they can afford.
The solution works for two reasons: One, private Medicare plans—just like Medicare—are a guaranteed issue, which means that no one who is eligible for Medicare can be denied coverage. Two, stratified plan design makes evaluating plans easier by enabling side-by-side comparisons, which forces insurance companies to compete on price, features and service.
Still, evaluating and choosing health insurance plans can pose a challenge for retirees. This is especially true for retirees who have been covered by their employers’ group plans and have never had the responsibilities of choice and control over their health coverage. That’s why a well-run health insurance exchange must be more than a self-service website.
For starters, exchanges must offer choice, with many plans from many carriers. But carriers admitted to the exchange must be screened carefully, held to high standards of service and their performance monitored over time. Carriers that fail to live up to service standards must be ejected from the exchange.
Next, exchanges also must offer powerful decision-support tools that empower anyone to quickly and easily compare plans side by side. In some markets, retirees might have a dozen or more plans from different carriers that could meet their criteria, and they must be able to see what each plan offers and how much it costs compared with the others.
Then, exchanges must respond to the desire of many retirees to have in-person guidance in addition to or even instead of online tools. They must have licensed advisers available by phone to help retirees assess their needs and choose the right plans.
Of course, there are other resources for helping retirees navigate Medicare and private Medicare plans:
• The official U.S. government site for Medicare is medicare.gov. States also offer assistance, and the State Health Insurance Assistance Program hosts a locator tool at shiptalk.org that can help seniors find the right program in their home state. Both are free.
• A few for-profit advisory services have emerged in recent years offering seniors information about basic Medicare. Some offer the ability to enroll in private plans; others just offer advice for a fee.
• Independent agents and brokers selling private Medicare plans usually can deliver personalized service. However, they can represent just a small number of insurance carriers and plans, which limits choice.
• Insurance company sales representatives are good sources of information about the plans their companies offer, but only sell plans from their own company, which further narrows choice.
In addition to providing for state-run exchanges in 2013, the Patient Protection and Affordable Care Act also extends the guaranteed issue and stratified plan design attributes of Medicare to all Americans purchasing private individual health care plans.
So while private exchanges offers employers a solution to the high cost of health benefits for their Medicare-eligible retirees, it probably won’t be long before exchanges provide employers similar relief for both active workers and retirees of any age.
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