According to a Watson Wyatt news release, many employers are moving beyond sponsoring plans that solely supplement Medicare benefits to account-based programs and Medicare-approved health plans run by third parties.
The survey found it has taken four years to fully implement the Medicare Modernization Act of 2003 and for the private market to begin offering new medical and prescription drug coverage options for retirees.
“Retirees might be nervous about changes to their health care plans, but the new options offer a very reasonable compromise,” said Cara Jareb, director of retiree medical consulting at Watson Wyatt, according to the announcement . “They ensure retirees will continue to have access to comprehensive medical insurance and, at the same time, allow employers to reduce administrative burdens and potentially stem health care benefit costs.”
The survey on employer-sponsored health insurance found that many large employers have already moved away from traditional defined benefit retiree medical plans. Only 18% offer such a program to new hires upon their retirement, with another 15% offering some financial support. Two-thirds (67%) of employers do not offer new hires financial assistance to pay for medical insurance on their retirement.
However, some employers are turning to employer or group prescription drug plans and Medicare Advantage programs, the study found. Medicare Advantage plans allow eligible recipients to choose alternatives to traditional Medicare plans and combine them with a drug benefit.
In 2006, the average premium for Medicare Advantage plans administered by third parties was $312 per year – nearly $3,000 less than the average employer-sponsored plan for Medicare retirees, according to Watson Wyatt. However, retirees generally experience greater out-of-pocket costs in Medicare Advantage plans.
“An account-based program can help employers define their retiree medical commitment and make costs predictable,” said David Speier, a senior consultant in Watson Wyatt’s retirement practice. “It also allows retirees to choose the benefit that is right for them.”
More information on Medicare Advantage plans can be found at http://www.watsonwyatt.com/medicareadvantage .