By 2024, 25% of the American workforce will be made up of workers over the age of 55, an all-time high, according to the Bureau of Labor Statistics. The 55-plus labor force has doubled since 1998 and is expected to continue to rise.
Over the last decade, older workers have become increasingly motivated to continue their careers past retirement age as wages have plateaued, life expectancy has increased and pensions have vanished. People are living longer, which means they’ll need more cash on hand, and today’s 65-year-old can be apprehensive about having too little money to comfortably retire—understandably so.
Older workers’ decision to stay around the office has caused confusion for many employers. They aren’t sure when workers will retire and, if these people decide to keep working, how to best support them. Older workers tend to offer a high level of experience, advanced industry skill sets and extensive business networks; they are often more loyal and apt to stay at their organization longer than younger workers are.
Businesses have the opportunity to fill a support gap—viz., in helping with financial and health care choices—for those individuals in the throes of retirement planning—while still maintaining their day job. A recent report from Willis Towers Watson found that, over the next three years, three in four employers plan to make it a priority to supply employees with the tools they need to make smart benefit choices.
Employers should also make a point to educate employees on how to make smart financial decisions, which can incorporate instruction about Medicare as an important optional benefit for anyone 65 and older. Decisions about Medicare are increasingly becoming critical for American workers as they consider their financial, career and retirement objectives. For employers, the program, if properly provided, can help them reduce costs.
Substantial savings can be appealing to both individuals and employers. Medicare Part B premiums start at $135.50, and deductibles are substantially lower, most under $200 or costing nothing at all. Under employer plans, 66% of workers have a co-pay when they visit a primary care doctor, whereas under Medicare, out-of-pocket costs are reduced or nonexistent. Additionally, 80% of employers have only one plan, while Medicare has multiple options covering 93% of primary care physicians.
At the same time, a key cost for employers is the company health plan. The annual health care costs of someone 65 or older are twice as high as for an employee 45 to 54, and Prudential estimates that a one-year delay in retirement can increase business costs by 1.0% to 1.5% annually. For a large company with $100 million in annual workforce costs, that’s an extra $1 million to $1.5 million.
When more money must go to employee health care, less is available for other business expenditures, programs or incentives. However, there are plenty of ways to support older workers without breaking the bank. The first is getting a handle on the issue by assessing your company’s demographics. Having an idea of how many workers are close to retiring or approaching retirement age will allow employers to craft an effective strategy.
Health insurance costs are one of the biggest expenditures for employers—they spend nearly $7,000 on premiums for each employee receiving single coverage. In the case of one midsize employer, which identified about 125 individuals on its group health plan, it realized annual savings of about $1.1 million by transitioning to Medicare for health care coverage. However, employers cannot force employees to make this transition. It’s up to the person—i.e., with the exception of those in firms with fewer than 20 workers, who are legally required to sign up.
Many employees and human resource (HR) professionals automatically assume that employer health care plans are the best and only option. But Medicare is often a more affordable, and in some cases higher-quality, choice than one’s employer-provided plan. Perhaps one of the biggest cost savers and benefits supports that employers can offer their older workers is expert assistance with understanding their options and making the transition from their employer medical plan to Medicare.
Making a plan to accommodate employees who choose to delay retirement is vital to managing workforce costs and employee well-being, especially as health insurance and retirement finances can be difficult for employees to fully understand. Fortunately, deciding on the best health care options isn’t something that HR has to do on its own. By connecting older workers with a Medicare expert, it can point them toward a low-cost health plan that best suits their individual needs. Transitioning eligible workers to Medicare is a win-win solution for both sides.
Tricia Blazier is director of health care insurance services at Allsup, LLC.
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