New Retiree Health Insurance Alternatives Gaining Steam
April 1, 2015
Nine out of 10 employers (89%) say retirement benefit security is somewhat to extremely important to their retirees. While employers want to honor their promises to retirees to provide medical benefits, rising costs and a lack of strategic alignment with their workforce management strategies is causing them to evaluate new alternatives.
These conclusions are based on results from the Towers Watson 2015 Survey on Retiree Health Care Strategies, which surveyed 144 HR executives at large and midsize employers that sponsor retiree medical benefits. Of these, 78% said their company currently provides health benefits to both pre-Medicare and Medicare-eligible retirees, and 70% said they will offer benefits to most of their current full-time employees when they retire.
However, according to the survey, just 38% of employers said their retiree medical benefit program is effective in attracting and retaining employees. Even fewer — 26% — said the benefit is integrated into broader workforce management and retirement strategies.
Thus far, most employers have relied on traditional levers to control costs and risk, including:
- Shifting costs to retirees
- Capping subsidies
- Changing eligibility requirements
- Limiting or ending retiree benefits for new hires
Increasingly, however, employers are looking at new options:
For pre-Medicare retirees, these include providing services that enable retirees to purchase individual health plans either directly from carriers or via public exchanges. For 2015, just 8% of employers are confident in public exchanges as a viable alternative, but confidence rises to 35% by 2017. By 2017, more than half of employers (53%) will reassess their current approach to providing retirees under the age of 65 with health benefits and will consider public exchanges and federal subsidies based on family income where the employer subsidy is nil or modest.
For Medicare-eligible retirees, nearly eight in 10 (78%) employers are already using or considering the services of a private Medicare exchange to assist retirees with finding individual coverage. In addition, insurance products are emerging that enable employers to transfer the liability for retiree medical benefits to a highly rated insurance company through the purchase of an annuity that gives retirees tax-free funding to pay medical plan premiums for life.
For more information on the survey, read the full report.