Employers Pondering Retiree Medical Coverage Changes

March 29, 2007 (PLANSPONSOR.com) - Employers are cautiously exploring new retiree medical strategies in light of the Medicare Modernization Act, a new survey has found.

A news release said that the nationwide survey developed by Towers Perrin and conducted by the International Society of Certified Employee Benefit Specialists (ISCEBS) found that nearly 40% of respondents offering post-65 coverage indicated that they had implemented or are considering an employer-specific Part D plan for their retirees (See Employers Plan More Restrictions on Retiree Medical Benefits ).

Also, almost 30% of respondents offering post-65 coverage have implemented or are considering a Medicare Advantage HMO or PPO option for their retirees, the survey found.

“Employers are interested in exploring new opportunities in the retiree medical market, especially for Medicare retirees,” said Barry Carleton, principal and Health and Welfare consultant in the HR Services business of Towers Perrin, in the news release. “But we sense some caution from employers in risking retiree disruption by moving too quickly into an uncertain market. The shift in employer practices appears to be more than evolutionary, but not quite revolutionary. It may take several more years for strategic direction to become clearer.”

According to the announcement, 57% of the respondents chose to “stay the course” for their 2006 post-65 drug coverage and were eligible for the retiree drug subsidy (RDS). After completing the first year in the RDS process, however, 81% of these employers experienced problems throughout their first year on the RDS Web site, causing 12% of this group to abandon the RDS process in favor of alternatives, the news release said.

Costs were a predictable driver of employers’ retiree health care decisions. However, many other factors also played a key role, including competitive pressures, early retirement pattern, government’s role in health care and accounting standards, according to the announcement.

The survey covered 157 respondents from corporations and nonprofit organizations. The full survey results are available here.