According to new data from Willis Towers Watson, 56% of U.S. employers are confident that the public exchange will be “a viable option” for pre-65 retirees within the next two years. The data comes from the 2016 Willis Towers Watson Emerging Trends in Health Care Survey, which gathered responses from 467 employers representing 12.1 million employees.

Additionally, the survey found that 72% of employers intend to make moderate to significant changes to their existing pre-65 retiree health benefits. The willingness of employers to make these changes can be attributed to the continued rise in health care costs for this segment of the employee population. In other words, costs rise, and employers need to take action.

In a recent article for Business Insurance, John Barkett, senior director of policy affairs for Willis Towers Watson, said, “Employers are seeking alternatives to providing their retirees with the same group health care coverage they offer active employees. Many employers have already transitioned their post-65 retirees to original Medicare plus private individual Medicare plans or are planning to. This keeps costs down and retiree satisfaction up. However, because Medicare is not available to younger retirees, employers are looking elsewhere for a solution.”

To read the article in Business Insurance, click here.

To read the complete press release from Willis Towers Watson, click here.

Recent data from Towers Watson revealed that by 2017, 53% of employers that sponsor health care programs for pre-65 retirees will reassess their approach.

“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 Trevis Parson, chief health actuary, Towers Watson.

Confidence is growing that public exchanges will be a viable alternative for employer-sponsored coverage for pre-Medicare retirees. While only 8% are confident for 2015, confidence rises sharply to 35% for 2017.

Looking for alternatives to traditional methods of providing coverage to pre-Medicare retirees stems from the high cost of coverage for this segment of the population.

While annual cost increases for Medicare-eligible retirees, without the benefit of Medicare but after plan changes (3.9%), are similar to those for active employees (4.0%), increases for pre-65 retirees after plan changes are much higher (5.5%). Further, 73% of employers offering medical benefits to retirees under 65 said their 2015 plan costs already exceed the cap for the plan.

As a result, employers are actively considering alternatives to current coverage models and making changes. In 2015, 61% of employers surveyed changed plan designs for their pre-65 retirees.

Considering alternatives should not be mistaken for considering ending coverage entirely. Just 4% of employers said they have given some consideration to ending coverage and subsidies — even though these retirees often have access to federally subsidized plans on public exchanges.

Even employers who are looking to end coverage do not want to leave their employees without options. Given the choice to 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%.

“Pre-65 retiree medical benefits are complex,” said Joe Murad, managing director for Towers Watson’s Exchange Solutions. “Companies have to consider the excise tax, new benefit options, provider networks and subsidies along with the retirement needs of their workforce. Fortunately, with guaranteed issue, the PPACA created a viable individual market for health insurance. Public exchanges simplify access to individual plans, and private exchange solutions help ease the experience of purchasing plans on public exchanges or directly from carriers. For the first time, employers can develop a pre-65 retiree medical strategy that meets the needs of retirees and helps them manage costs.”

Click here for the full release.

Towers Watson has unveiled a new personalized decision support service that will help pre-Medicare retirees determine whether they are better off using a subsidy from their former employer or taking a tax credit from the federal government. Under the Patient Protection and Affordable Care Act, pre-Medicare retirees can use either a tax-advantaged employer subsidy or a federal tax credit to defray the cost of their health insurance premiums — but not both. The service is designed to help early retirees optimize their health insurance spending without “double dipping.”

Employer clients of Towers Watson’s OneExchange requested the service to make it easier for their early retirees to evaluate and enroll in health plans on the individual market. Retirees can take advantage of the service by phone through a OneExchange benefit advisor or go online and access a guided self-service tool at no charge.

For employers offering subsidies, Towers Watson will create and manage health reimbursement arrangements (HRAs) for their early retirees. Early retirees accepting employers’ funding have the option of buying individual plans directly from insurers or from public exchanges. Early retirees who accept a tax credit must choose plans from the public exchanges.

For more information about the new service, click here for the full release.

On Wednesday, October 19, 2011 the Social Security Administration announced the first cost-of-living adjustment (COLA) since 2009. Over 60 million Americans will receive a 3.6% increase in their Social Security and Supplemental Security Income (SSI) benefits.

Increased payments for over 8 million SSI beneficiaries begins on December 30, 2011, and nearly 55 million Social Security beneficiaries will start getting their 3.6% cost-of-living adjustment in January 2012. According to the SSA press release, the Social Security increase for some beneficiaries “may be partially or completely offset by increases in Medicare premiums.”

More information:

Visit Extend Health — the nation’s largest private Medicare exchange.

Washington Extension

October 7, 2011

Medicare News

Researchers at the Harvard School of Public Health found that among Medicare beneficiaries in their last year of life in 2008, one-third had a surgical procedure performed. One-fifth had surgery in the last month of life, and one in ten had surgery in the last week of life. The rates of surgery varied dramatically across the country, but geographic variation is controversial because it is unclear whether it reflects unnecessary care or true differences in patient needs. This report adds to the influential research conducted by the Dartmouth Atlas of Health Care showing Medicare beneficiaries living in areas of the country with lower intensity of end-of-life care do not have higher mortality rates.

The Michigan state legislature voted to end retiree health benefits for future and newer sitting legislators, in the face of state budget shortfalls. Retiree health benefits cost the state about $5 million in the last fiscal year. Governor Rick Snyder has promised to sign the legislation.

ACA Updates

The Institute of Medicine (IOM) released its highly-anticipated report on the criteria for determining essential health benefits (EHB) that ACA-qualified health plans must cover. The ACA defined ten categories of commonly-covered health services that plan benefits must include. The IOM identifies criteria for defining and updating specific components of the EHB, including: use a public deliberation process, include only medically necessary services that are value-based, promote some state flexibility, make annual updates based on credible evidence of effectiveness of benefits, and rely on typical coverage in the small employer market. Unlike Medicare’s coverage standard of “reasonable and necessary”, the IOM recommends higher standards for benefit coverage, such as the treatment demonstrate meaningful improvement over current effective services/treatments, and is cost effective. These criteria (among others) are aligned with the criterion that the EHB package, in aggregate, be affordable.

In ongoing litigation regarding the ACA, 26 states and the NFIB filed petitions to the Supreme Court to appeal the ruling in the Eleventh Circuit which struck down the individual mandate but upheld the remainder of the ACA. The Department of Justice also filed its own petition requesting review of the Circuit Court decision, significantly increasing the odds that this issue will appear on the Supreme Court’s docket this term (though the Court may have more than one case to choose from). Outstanding questions remain about the ability of the Court to rule on a federal tax law before anyone has actually paid the tax (i.e. the individual mandate penalty).

Nebraska will wait until the Supreme Court decides on the constitutionality of the ACA before setting up a health insurance exchange. According to the governor, the state is designing a program and applying for federal funding, but won’t build a “formal proposal” until the Court decides. Minnesota’s prospects are less clear: while the governor has secured millions of federal dollars, and has support to design a state-run exchange from the Minnesota Chamber of Commerce and some Republicans in the legislature, a debate rages about whether the governor needs authorization from the GOP-controlled legislature—which has been unwilling to pass a bill—to set up an exchange.

On the Hill

House Republicans released their 2012 draft budget for health, labor and education, totaling $153.4 billion. This compares with the Senate Democrats’ proposed budget of $165.3 billion. The Republicans’ draft bill prohibits funds to implement the ACA, as well as provisions to rescind funding already provided for ACA programs. Rep. Denny Rehberg (R-MT), chairman of the House Appropriations Labor-Health and Human Services subcommittee, recently wrote to the “Super Committee” recommending they cut ACA Medicaid expansions and affordability credits to achieve their $1.2 trillion deficit reduction goal.

Reports/Other News

About one quarter of retirees think that life in retirement is worse than before they retired, according to a RWJF/NPR/Harvard School of Public Health poll. This compares with only 14% of pre-retirees who expect that retired life will be worse. Retirees cite costs of medical treatment and long-term care as especially worrisome. Many fewer pre-retirees think that their health will be worse (13%) during retirement than retirees who say their health actually is worse (39%). Pre-retirees are also less confident (38%) that Medicare will provide benefits of at least equal value to current benefits than retirees (52%).

Average annual premiums for employer-sponsored health insurance in 2011 rose 8% for single coverage (to $5,249) and 9% for family coverage (to $15,073) over 2010 costs, according to this year’s Kaiser Family Foundation/HRET employer health benefits survey. The percentage of total premium paid by workers is similar to 2010 (18% for individuals, 28% for family coverage). Among firms offering coverage to employees, 26% offer retiree coverage, similar to 2010. State and local governments are most likely to offer retiree health benefits (83%), while large firms in the retail and wholesale industries are least likely (15% and 16%). Nearly all (91%) of offering large firms cover early retirees below age 65, while 71% cover Medicare-age retirees. AHIP blames rising insurance costs on prices for medical services, asserting that Washington must do more to control cost growth. Kaiser attributed 1-2% of the premium increase to provisions of the Affordable Care Act, including allowing children up to age 26 on their parents’ health insurance.

The Government Accountability Office (GAO) released a report showing 170,000 Medicare Part D beneficiaries received prescriptions for controlled substances from five or more physicians in 2008, indicating fraud and prescription drug abuse in Part D. In ten individual cases examined by the GAO, physicians did not know that their patients were receiving drugs prescribed by other physicians. Although Part D plans are required to perform retrospective drug utilization reviews to identify inappropriate or unnecessary medication use, plans are not authorized to restrict drug access based on the findings.

Visit Extend Health — the nation’s largest private Medicare exchange.

Lazzy Feet on a Blue Ocean Beach vacation

Image by epSos.de via Flickr

The American Instistute of CPAs recently released results of a poll that  asked people about their retirement expectations. The survey of 1005 working American citizens came back with a depressing result: for the second year in a row, four out of ten say they don’t think they will ever be able to retire. Other results are just as depressing: 55% don’t know how much they need to have in savings to retire, and many who think they know are way off in their estimates. Read the full story on the AICPA web site for more.

The survey didn’t even ask about affording health care in retirement – but we know from other surveys that mostly as a result of the closing of the Medicare Part D donut hole over the next few years, that cost has actually gone down a bit. Long term, however, rising health care costs are still an issue for retirees and the underlying factor in yearly insurance premium increases. That’s why we’ve been writing about things like the CMS proposed rules for ACOs and the CMS Center for Medicare and Medicaid Innovation on this blog. Medicare is still the most cost-effective way to deliver health care to seniors – and we hope that CMS can use its influence to accelerate the development and dissemination of innovations that will help slow or reverse rising health care cost trends.

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Back in May 2010, HHS announced a $5 billion program to help employers fund health care for their early retirees – people who are not yet eligible for Medicare. The fund was much talked about in the news, and pundits predicted it would all be gone within two years if not before. That meant it wouldn’t last until 2014, when early retirees can get guaranteed issue insurance on state health benefit exchanges.

Well, it looks like those predictions may have been a little pessimistic. To date, according to U.S. News & World Report, only $535 million of that $5 billion has been paid out. State and local governments and non-profits make up the majority of employers who’ve applied for and been granted funds.

At this rate the money will last for ten years. (If you’re interested in participating, go here for details.) So what about it, employers? Why has so little of this fund been used?

Extend Health CEO Bryce Williams has written a new piece just published on the Society for Human Resource Management Web site. Bryce is known around here not only for his deep knowledge of health care insurance, but for constantly thinking about ways we can empower employers to provide affordable health care benefits to their employees. This new article offers some sage advice for employers who want to continue to offer early retiree benefits but need to control their costs. The key? Start moving them to defined contribution plans now:

“Until 2014, can early retirees be helped? The answer is yes: by beginning to move them from legacy group plans to ‘defined contribution health plans’ and providing education and tools, HR managers can empower their early retirees to become cost-conscious and careful consumers, changing their mindset from ‘I don’t know how much my health benefits cost and I don’t care’ to ‘I know how much my health benefits costs and I do care.'”

The article outlines a roadmap for supporting early retirees through the transition from group plans to individual plans purchased on the coming state insurance exchanges, with advice for the kind of programs and education that will help this vulnerable population become “empowered individual health insurance consumers” — while at the same time giving employers the ability to plan, predict, and control costs.

In light of the unrest in France over changes to the mandatory retirement age, as well as the ongoing discussions in this country of the effect of retirement age on Social Security, Extend Health last week polled our retiree panel for their opinion on the issue.  CNBC picked up on the results this morning in a story on why retirement age matters.

We learned that most people (85%) don’t think there should be a mandatory retirement age. Of the 15% minority who think there should be a mandatory retirement age, 42% say it should be 65; 31% say it should be 70; 21% say it should be 67; and the remaining 6% say it should be 72.

Out of the total, 17% are still working at a paying job or have their own business; the majority of that group (62%) say they do it to stay active and engaged.

Click on the link to see the full results, based on responses from 431 retirees over the age of 65. Read the rest of this entry »

Benefits and human resources consulting firm The Segal Company has just published its yearly survey of health care plan cost trends. Based on responses from 60 insurance carriers, the report offers a wealth of helpful data on the outlook for plan costs in 2011 and compares 2009 actual results to forecasts. The 6-page report is chock full of data on medical plans for active employees, pre-65 retirees, and Medicare-eligible retirees, prescription drug carve-outs, and dental and vision plans.

The report projects cost trends for Medicare Advantage PFFS and PPO plans with prescription drug coverage to increase in 2011 by 7%, vs. an expected 9.5% for 2010. MA HMO plans with RX are projected to grow by 7.4%, vs. a projected 8.2% in 2010. Interestingly, forecasts in the past have erred on the high side, as “…actual trend rates in 2009 for MA HMOs…were significantly lower than forecasted…” and “Actual prescription drug trend rates continue to be lower than forecasted.”