2019 Retiree Health Care Survey

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Now is the time for plan sponsors to review current retiree health care strategies

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An Evolving Marketplace

As plan sponsors evaluate the changes introduced by health care reform relative to retiree health care strategies, they are finding that two fundamental approaches should be considered: modified group-based benefit sourcing and individual market-based benefit sourcing. The data shows that individual market-based strategies are currently the most prevalent choice for many plan sponsors – initially for Medicare-eligible retiree groups, and then potentially for pre-Medicare retiree groups after the marketplace stabilizes. But there’s no such thing as a “one size fits all” option. Some plan sponsors are opting to segment their strategies to apply both approaches moving forward. In some cases, plan sponsors will choose to apply individual market-based sourcing where possible and fall back on modified group-based sourcing for certain populations.

Individual Market-Based

Subsidy Reduction

Eliminate Volatility

Group- based

More Choice

managing costs

Alternate Part D

HDHPs / HSAs

Allow a reduction in plan sponsor subsidy costs driven by the competitiveness and efficiency of the individual market.

Allow the plan sponsor to eliminate the self-insured claims /premium volatility inherent in current group programs.

Can be structured to consistently provide retirees with significantly more choice and greater value for health care dollars.

Leveraging new group-based Medicare Advantage strategies to manage costs and improve retiree health.

Changing from collecting the RDS to an alternate Medicare Part D strategy, including contracting with a group-based Part D plan.

Managing the projected impact of the excise tax, potentially in conjunction with leveraging high-deductible health plans (HDHPs) and health savings accounts (HSAs).

Many plan sponsors are migrating Medicare-eligible populations to what has become a large, expanding, competitive and cost-effective individual health care market.

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30%

39%

Use individual market/exchange-based strategies

Terminated drug coverage

Use an individual Part D strategy with out-of-pocket reimbursement

Terminated group drug coverage with Part D premium support

of plan sponsors surveyed are leveraging the individual market to support all or a portion of Medicare-eligible retiree benefits.

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Current Guided Access

Future Guided Access

Medicare Advantage Plans

Current Guided Access

Future Guided Access

Medicare Advantage Plans

Nearly one-third of plan sponsors surveyed are already leveraging individual market-based benefit sourcing strategies for all or a portion of their Medicare-eligible retiree population.

Current Guided Access

33%

74%

24%

Multi-Carrier Exchange

Single Carrier Exchange

No Exchange Partnership

Future Guided Access

Will adopt

12%

Not considering

59%

Multi-Carrier Exchange

35%

57%

Unsure of Exchange Strategy

Single-Carrier Exchange

29%

Will consider in the future

Plan sponsor use of group-based Medicare Advantage strategies has grown since the passage of federal health care reform, indicating that the market is slowly getting comfortable with the evolution of the Medicare Advantage program.

Medicare Advantage Plans

Offer Medicare Advantage

35%

Doesn’t offer benefits to Medicare retirees

Don’t offer Medicare Advantage

45%

For those not yet leveraging an individual market strategy, there is a significant number considering this approach for some portion of their Medicare-eligible retiree population in the future.

Only offer Medicare Exchange

11%

Local/regional HMO/PPO

32%

46%

National PPO

Both National PPO and Local/Regional HMO/PPO

22%

Health care reform introduced changes that specifically affect pre-Medicare eligible populations, including an excise tax on high-cost health plans beginning in 2022.

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38%

19%

14%

13%

Medicare-Eligible Retiree Strategy

Pre-Medicare Retiree Strategy

of plan sponsors surveyed are unsure how they will mitigate the excise tax at this time

of plan sponsors surveyed do not anticipate changing their long-term strategy because their current strategy adequately mitigates the excise tax

of plan sponsors surveyed are changing plan features to reduce plan costs (e.g., managing deductibles, copays, coinsurance, etc.)

of plan sponsors surveyed do not anticipate changing their long-term strategy because they believe the tax will be repealed prior to implementation

Moving Towards the Individual Market

An Unstable Marketplace

Because of the volatility in the current market, very few plan sponsors have chosen to directly leverage the new ACA marketplace as a pre-Medicare retiree benefit sourcing opportunity. There is a range of near-term political, operational, legal, and economic uncertainties that need to be clarified before many organizations will be comfortable sending pre-Medicare retirees to the public marketplaces to secure coverage for the long-term.

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70%

21%

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of plan sponsors surveyed are not confident that they will be comfortable sending their retirees to the marketplace to secure coverage in the future.

21%

70%

of plan sponsors surveyed are hopeful that the market will stabilize over time to a point where they can eventually send retirees to the marketplace to secure coverage.

of plan sponsors surveyed are comfortable leveraging the marketplace to source pre-Medicare retiree coverage for at least a portion of their retiree group.

Future Outlook

Plan sponsors continue to be motivated by opportunities to reduce cost, risk and administrative burdens through specific strategies made possible under federal health care reform and subsequent legislative activity. In the near term, we expect that group and individual market-based opportunities will continue to flourish for Medicare-eligible populations. However, ACA marketplace instability and limited group-based solutions for pre-Medicare retirees will result in most plan sponsors taking a “wait-and-see” approach with respect to pre-Medicare retiree health care strategy.

Smart plan sponsors aren’t waiting for the political process to conclude before evaluating and refining their programs. Many are making changes now.

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Some plan sponsors have already made changes to their retiree strategies to offset the immediate increase in accounting costs associated with this new tax, but there is still much uncertainty surrounding long-term strategy.

67%

Not leveraging

Leveraging

38%

19%

14%

13%

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21%

70%

of plans sponsors surveyed are hopeful that the market will stabilize over time to a point where they can eventually send retirees to the marketplace to secure coverage.

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