The changing landscape of health care in the United States is causing confusion and alarm, particularly for an aging population of retired workers — a group with great reliance on health care. Trying to explain the intricacies of a specific market can be confusing to the coordinator, let alone the retiree who has been accustomed to one thing and is now being told they are getting another. Coordinated phone calls typically last 55 minutes, tying up call center personnel and doing little to reassure a confused retiree.
The creation of health care exchanges has done little to quiet the noise. Exchanges require that retirees navigate this uncertainty on their own, buying directly from the carrier with no familiarity or direction. Additional options come with more questions, but working with the right partner helps ease the minds of an organization’s former employees so they can enjoy their retirement. Group plans have customer advocacy centers that cater specifically to an elderly population and can reinforce trust during such an ambiguous time.
The following misconceptions about health care exchanges will help shine light on some of this misinformation and show how group plans are a better option that individual plans in the post-65 space.
1. Individual plans are cheaper than group plans
Not necessarily. A retiree who is 65 may be able to find an inexpensive individual plan, but that likelihood decreases exponentially as an individual ages. One reason is because individual plans have costs built into them to help the carrier recover adverse selection. And because there is a “take it or leave it” component built into individual plans, meaning the individual can always go look for another plan if one isn’t to their liking, they will often have a charge (usually around 10%) to protect themselves.
Some carriers try to build-in other underwriting characteristics in an attempt to circumnavigate this situation, often with a questionnaire. Individuals who “pass” the underwriting questionnaire may then receive a preferred rate, but it isn’t an exact science. This maneuvering doesn’t exist with group plans, which are rated across the entire retiree segment rather than on an individual’s particular characteristics. Additionally, multiple plans are available to a retiree in a group setting, but with literally hundreds of individual plans available it can be difficult for one to feel assured that he or she is choosing the right plan. A retiree can certainly pick the most inexpensive plan, but going that route almost guarantees poor coverage.
2. Moving to an exchange eliminates employer financial liability
FASB106 liability is based on an obligation to pay for retiree benefits, regardless of whether these benefits are offered to the individual or a group. The reality is that these liabilities will continue to exist as long as the employer makes contributions in any form, and in any amount, to a retiree’s plan. This standard requires reporting of costs as well as advance mechanisms that ensure future payments to retirees will be available.
3. Retirees want more coverage options at different price points
Choice is a good thing, but too much choice is often overwhelming. In a recent survey conducted by AmWINS Group Benefits, a pool of more than 1,500 retirees enrolled in a group plan was asked if they wanted more options, and responses came back 50/50. Of those who wanted more, 82% said they only wanted two or three options at the most. Health care is critical to an aging population, and retirees are likely to have many questions when it comes to choosing their individual plans. Retirees want comfort in not only their coverage, but the stability that comes with consistent care.
4. Exchanges eliminate the employer’s administrative burdens
Because health care is critical to an aging population, they are likely to have questions and concerns along the way. A large American auto manufacturer switched to an exchange model and knew what to expect – the noise level from retirees was deafening and it continued for nearly a year. The company had no choice but to take it. If administrative obligations and burdens are a concern, consider changes to the administrator, not the plan.
5. The move to an exchange won’t cause any disruption for the retiree
The confusion that comes with a shift to an exchange model is likely to have a detrimental impact on the retiree, which can cause great disruption within the employer’s organizational structure. Retirees, the same group that built the company and carried it through hard times to prosperity, can feel forgotten once they are thrown into the exchange model. Often the people who made promises to former employees about their health care needs in the future are long gone, replaced by players in a management structure with no relationship with these retirees.
While inevitable, change is never easy. It’s not too late to support loyal, former employees in the midst of health care reform by removing some of the anxiety around change and overwhelming choices.
Fleet is president of AmWINS Group Benefits, a Charlotte, N.C.-based wholesale broker of comprehensive group insurance programs and administrative services.
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