Question: What options are available these days for employers who need to cut back on retiree health spending, but still want to provide health care to their former workers?
Long after employees retire with the proverbial gold watch, a company may still be carrying them on the books. Through collective bargaining, contractual obligations, or simply a commitment to doing what is right, the employer often arranges for group retiree coverage.
No company ever sets out to become a retiree benefit administrator. But sooner or later, as a business matures and its workforce moves into the retirement years, many companies find that both time and resources are pulled away from their core business focus to support their healthcare obligations to former employees.
As economic pressures have continued to mount over the past few years on top of government regulations requiring disclosure of future costs on current balance sheets, many employers have looked for ways to cut back on retiree health spending. Shifting to a Medicare Exchange has emerged as a popular option. Under this strategy, employers allocate the retirees a stipend so they can shop for their own supplemental policies on an “exchange” that gives them choices across a broad range of available policies.
Giving people choices always sounds like a great idea. However, as the marketplace for consumer goods of all types has expanded, choice has become a mixed blessing. Retirees left on their own to evaluate benefit plans often have difficulty determining which one will provide them with the best coverage. Holes in the coverage they choose may not be noticeable until people use the policy, after it is too late to make any changes.
The good news it that there is now another option. An ERISA-exempt, hybrid retiree Medicare solution can combine the best of both worlds for retirees and employers alike: customized plans to match a retiree’s current benefits plus consulting support if the retiree prefers to shop around.
The hybrid solution helps retirees benefit in a number of ways. Medical plans can be arranged with multi-year guarantees, providing financial stability over time. In addition, a choice of plans can be presented that meet different criteria for pricing and coverage – including a more robust pharmacy benefit, often an important consideration as retirees age and face chronic medical needs. The hybrid plan also assumes the role of assisting retirees through call center support with experienced, licensed benefit advisers.
For employers, these type of plans help cut costs and remove future liabilities from their current balance sheet while still holding up their social obligation to former workers who helped them build their success.
If you’re a broker with tough questions, I’m here to provide unbiased answers and feedback to help you take the next step in adapting your business. Feel free to leave your question in the comments.
Fleet is president of AmWINS Group Benefits, a wholesale broker of comprehensive group insurance programs and administrative services. He can be reached at asksam@amwins.com.
