As employers continue to find ways of cutting their health spending, an increasing number of firms have stopped offering supplemental health benefit plans to retirees on Medicare. Instead, companies are contracting with external insurance marketplaces — exchanges similar to the state-wide models mandated by Obamacare in 2014 — to provide Medicare-eligible retirees with a choice of supplemental plans to cover benefits such as hospital visits and prescription drugs, Kaiser Health News reports.
Companies have been shifting away from providing former workers with supplemental coverage directly, but most still give retirees a monthly contribution through health reimbursement arrangements (HRAs) with which they can buy a plan on the participating exchange. Counselors with the exchanges help Medicare-eligible retirees sift through their coverage options, helping seniors decide whether a Medicare Advantage plan or some other form supplemental coverage would best suit their health needs. According to KHN, this exchange model has the potential to save employers money while also opening up an array of choices for consumers:
In 1993, 40 percent of employers with 500 or more workers offered medical insurance to their Medicare-eligible retirees, according to human resources consultant Mercer’s annual survey of employer health benefits. By 2011, that figure had fallen to 16 percent.
Many employers that contract with exchanges such as Extend Health, which offers 4,000 plans from 80 carriers, fund at least part of the coverage by making deposits for their retirees into accounts called health reimbursement arrangements, or HRAs.
The exchanges can benefit both employers and retirees, experts say.
Employers’ costs are capped and predictable, with fewer administrative hassles, says Bruce Richards, chief actuary and quality leader for Mercer’s health-care business. Meanwhile, because retirees can pick among different plans and rates, “usually most people are better off,” he says.
While the retiree exchanges theoretically hold promise for consumers and employers alike, funding and subsidies for such programs will be a critical issue for retirees seeking to enhance their Medicare coverage. As the KHN article highlights, while a full third of employers currently offering direct retiree benefits may drop this coverage in the next fiver years, “42 percent said they’d do so without providing subsidies to help retirees buy coverage.” That would be disastrous for American seniors who would be forced to finance prescription drug and other supplemental coverage out-of-pocket.
Obamacare is a good deal for consumers because in addition to setting up these types of exchanges and requiring people to have insurance, the health reform law also gives Americans defined federal subsidies based on their financial needs to make sure they can afford their coverage. If employers do not incorporate the same funding into their insurance exchange contracts for Medicare-eligible retirees, they will still be offering seniors an array of coverage options — but not the money to afford any of them.