In an effort to reduce benefit costs, an increased number of employers are seeking new options for retiree health care coverage, indicating an opportunity for advisers to offer solutions to clients.
The number of employers with retiree health coverage dropped to 23% in 2015, according to the Kaiser Family Foundation. These coverages typically cover prescriptions, cap out-of-pocket expenses and cover Medicare deductibles and co-pays.
According to Aon Hewitt’s 2015 Retiree Health Care Survey, 35% of public and private sector employers are now using private healthcare exchanges for their retiree health benefits. Seventeen percent of employers say they will soon be switching their plans over to exchanges and 46% of employers saying they are considering it.
John Grosso, Aon Hewitt’s senior vice president says he doesn’t want people to view employers as dropping retirement healthcare coverage, but rather employers finding a more efficient way to deliver the promised benefits.
“It’s a transition, moving away from traditional group based planned sponsorship to sourcing coverage, asking retirees to secure coverage in the individual market with support from an exchange,” Grosso says.
Grosso says these exchanges come at a lower cost to employers and manages to break even for the retirees; however Grosso says employers tend to share the cost with the retiree in order to maintain a good working relationship.
One of the major differences between the traditional group retiree healthcare coverage provided by an employer and individual coverage assisted by an exchange is the chance for the retiree to have a plan that fits the need of that specific individual, rather than a one-size-fits-all plan.
Grosso says the exchanges are acting as the broker when it comes to transitioning retirees from their original employer provided plan to an individual plan.
“It is imperative that the exchanges provide licensed, credentialed benefit advisers to help retirees identify, evaluate and enroll in the coverages that best fit their needs potentially every year,” Grosso says. “Those brokers are a critical part of this transition in order to get retirees the high level of customer service they need to make informed decisions.”
Quote"“It is imperative that the exchanges provide licensed, credentialed benefit advisers to help retirees identify, evaluate and enroll in the coverages that best fit their needs potentially every year."
When it comes to the feedback from the retirees when transitioning, Grosso says the responses tend to be mixed between those who are just now going through the exchange as opposed to those who have already gone through the process.
“Any kind of change in healthcare benefits to a group of senior citizens is going to bring about concern,” Grosso says. “Typically we see an emotional reaction initially, but once retirees start to understand the value they can achieve in an individual market, many of them say, ‘Hey this looks like this is going to be a better deal for me than it was in the group space.’”
There is no required time frame for employers to inform their retirees as to when they may switch their retirees over to an individual program; however the average employer has typically been giving their retirees six months to a year notice as to when their plans will be changed.
“This time allows the retirees a chance to prepare for the change,” Grosso says. “Educate them on what the exchange means, implementing the exchange, setting up appointments for their retirees with benefit advisers to evaluate coverage and get them into a plan for the next plan year.”
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