Ten years ago, about 28 percent of large employers offered health coverage to retirees 65 years old or older who were eligible for Medicare.
Since then, there has been a steady decline of employers who offer retiree coverage, with about 19 percent of those same employers offering coverage today. Although these percentages vary significantly by industry, the overall number of employers who offer retiree coverage is steadily declining.
But while the numbers are staggering, health coverage is still an important benefit to add to a retiree package.
“Offering retiree health coverage builds employee loyalty, encourages longevity within a company and gives older working employees an incentive to retire, versus maintaining employment to keep benefits,” says Sandra Pollard, account executive for SummaCare’s Medicare group product line.
Smart Business spoke to Pollard about retiree coverage options available and alternatives for companies who find it financially difficult to offer retiree coverage.
What should employers consider when determining if they will offer retiree benefits?
Before employers decide to offer medical plans to retirees, they must take into consideration the demographics of the retiree base, including age, years of service or a combination of both. Knowing who will utilize the benefits will lead to a package that makes sense for both the company and retirees.
After an employer defines who the retirees are, it should consider the cost of offering coverage not only now but also in the future. The plan the employer chooses should fit within the company’s vision and be financially sustainable for years to come.
What are some options that employers may consider in offering group retiree coverage?
In recent years, group Medicare Advantage plans have become very popular. These health insurance plans coordinate with Medicare and provide employers and unions multiple options for providing health insurance coverage to their Medicare-eligible retirees.
A group Medicare Advantage plan should complement active employees’ health insurance plans so that the transition to the retiree plan is convenient and almost seamless for retirees. Try to match benefits as closely as possible. This helps ensure that employees, including those who need ongoing services or treatments, will transition into their retiree plans without any disruption in coverage.
There are many types of group Medicare Advantage plans available for employers to choose from, and most plans will provide coverage for retirees on a national basis, which is ideal for companies who have retirees residing all over the country. Or, if the retirees tend to reside within a certain geographic area, employers can choose a plan that offers coverage through a select network of providers. Coverage on a national level is then available for emergency and urgent care for those who travel frequently.
What alternatives do employers have if they can’t offer full or partial retiree coverage?
Under the Medicare Modernization Act of 2003, employers can offer retirees access to medical benefits via a sponsorship program. An employer-based sponsorship program could be designed so that the retiree receives a richer benefit than what would be available under traditional Medicare. Medicare Advantage programs of this type also provide the retiree comprehensive disease management and health and wellness programs.
In a sponsorship program, an employer works with a health insurance company to provide retirees easy access to a health benefits package, with no cost to the employer. The employer acts as a facilitator to allow retirees access to a group-level benefit without the retirees having to find plans on their own. The employer can even coordinate enrollment in the plan and offer informational sessions geared toward retirees and their specific benefits under the plan.
The major advantage of offering a sponsorship program is that the employer, acting as a facilitator and bearing minimal administrative burden, meets both the social responsibility guidelines and loyalty aspect of providing a medical benefit package to retirees. Retirees, in turn, have access to a benefit package richer than one they would find if they had enrolled in a plan on their own. For example, group plans typically have no coverage gap in pharmacy coverage.
Employers can also help employees who are preparing for retirement find options available to them and supply them with information on products available to them at the time of retirement.
What if employees keep working after they become eligible for Medicare?
We all know that many people cannot afford to retire at age 65 and therefore continue working indefinitely. Because one component of health insurance premiums is based upon the demographics of the work force, many small employers are paying high premiums if they have active workers over the age of 65. Some health insurance carriers have developed products to meet the needs of these small employers, allowing those with working Medicare-eligible employees to enroll in a customized group Medicare Advantage plan while keeping their employees under the age of 65 enrolled in their standard plan offering. The employer is able to offer the Medicare-eligible employee comprehensive benefits while realizing the cost savings of not having them in the same risk pool as their under-65 employees.
As the baby boomer generation approaches retirement and/or Medicare-eligibility, employers will see many different product offerings in the market to meet their needs. And with the ever-changing economy, health insurance companies are continuously looking for ways to meet the needs of potential and current members.
