ACA Prods Employers To Consider New Alternatives
Large employers have long sought cost-effective solutions to deliver health care to their pre-65 retirees.
In the wake of health care reform, they may have found them. Over the next two years, more than half of the employers surveyed that provide health care to pre-65 retirees are planning significant changes to their medical benefits and how those benefits are delivered, according to data from global professional services company
According to a company release, the
"Pre-65 retiree medical plan sponsors have been eagerly awaiting options to deliver improved value to their early retirees. For too long, limited options and high costs have burdened employers and retirees alike. In part, these barriers have been addressed and now private exchanges can help retirees find coverage that best suits them," said
Cost trends for
"Many employers have concluded that their pre-65 retiree medical benefit programs are a costly obligation that fails to meet their current benefit or workforce management objectives," adds Parson.
In the absence of better solutions, most employers have fallen back on traditional methods to control the costs of pre-65 retiree medical plans. For 2015, 61 percent of employers surveyed that provide pre-65 health coverage changed plan design. Forty-two percent currently offer or have added account-based health plans (ABHPs) with high deductibles connected to tax-advantaged health savings accounts for the plan year 2015. Another 8 percent are considering ABHPs for 2016 or 2017. Also, plan sponsors have relied on cost shifting to retirees, using cap arrangements. Forty-five percent reported capping the company subsidy for pre-65 retirees. As a result, subsidy caps may divert employers' attention away from actively managing the plans more effectively on behalf of retirees.
Increasingly, employers are also interested in public exchanges as a new alternative to providing pre-65 medical benefits because of the federal subsidies potentially available to retirees based on family income. However, just 4 percent of employers said they have given some consideration to ending coverage and subsidies since retirees often have access to federally subsidized plans on public exchanges. When asked if they would end coverage but provide a private exchange solution that connects retirees to plans on the public exchanges, the percentage of employers that have considered this option rises to 17 percent. Notably, confidence is growing that public exchanges will be a viable alternative for employer- sponsored coverage for pre-
"Pre-65 retiree medical benefits are complex," said
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