Employers Reassessing Retiree Health Strategies

March 26, 2013 (PLANSPONSOR.com) – More than 60% of employers are reassessing their long-term retiree health strategy, according to a survey from Aon Hewitt.

This reassessment is in response to rising health care costs and mandated changes from the Patient Protection and Affordable Care Act (PPACA). Approximately 20% of employers currently offer guided access to the individual Medicare retiree plan market through an individual health exchange and another two-thirds are considering this strategy for the future. According to Aon Hewitt, employers can potentially reduce their gross retiree medical spend by 20% to 50% per year by transitioning retirees to this type of model. 

“The economics of providing traditional employer-sponsored retiree health coverage are changing, and employers are seeking the most cost-effective and tax-efficient delivery models,” said John Grosso, a senior vice president in Aon Hewitt’s health and benefits practice. “Retiree exchanges provide access to these individual market efficiencies, along with a wider choice of health plans than exists in the traditional employer-provided retiree health plan. Very often, retirees can purchase individual Medicare Advantage, Medigap or Medicare Part D plans at lower rates than the employer can offer for comparable coverage due to the federal subsidies, Medicare Part D program enhancements, and market-based competition found in the individual market.” 

In addition to having access to a wider range of options, Aon Hewitt estimates that retirees can save an average of $1,000 each year when purchasing their health benefits through individual retiree exchange such as Aon Hewitt Navigators. This program helps retirees navigate among plan choices and combinations available in the individual marketplace, offering benefits advisers to assist retirees with questions or concerns. 

The survey covered 550 companies covering almost four million retirees.