Employers Plan Changes to Pre-65 Retiree Health Benefits

Many feel public exchanges will be a viable option.

More than half (56%) of U.S. employers are confident that public health insurance exchanges will be a viable alternative to group health plans for pre-65 retirees by 2018, according to a survey from Willis Towers Watson.

The survey also found that in the face of continued pre-65 retiree health care cost increases, 72% of employers plan moderate to significant changes in pre-65 retiree health benefits over the next four years.

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These findings, from the Willis Towers Watson 2016 Emerging Trends in Health Care Survey, revealed that employers expect a 4.1% cost increase for pre-65 retiree health care after plan changes or 5.7% without plan changes in 2016. This compares with an expected 2% cost increase for Medicare-eligible retiree health care after plan changes or 3.3% before plan changes this year. These expected cost increases factor in that some employers fund retiree benefits through fixed contributions made to health reimbursement arrangements.

The survey found that of employers offering pre-65 retiree medical coverage today, 67% offer pre-65 retirees a subsidy for health insurance. If retirees are eligible for a federal subsidy, they can purchase plans on public exchanges with the subsidy. If not, they still can purchase plans from public exchanges without a federal subsidy or directly from health insurance companies with or without an employer subsidy.

“With employer confidence in public exchanges for pre-65 retirees growing, we expect the individual plan market to play an increasingly important role in employers being able to continue providing health benefits for that demographic,” says Joe Murad, managing director, Individual Exchange Solutions, Willis Towers Watson.

The Willis Towers Watson 2016 Emerging Trends in Health Care Survey was fielded in January and February 2016. The 467 employers that responded represent 12.1 million employees and are mid-size to large companies across a variety of industries.