Employers Face Hurdles In Dropping Retiree Health Benefits
Employers are increasingly considering shifting retirees out of their health plans and into Medicare because of the Patient Protection and Affordable Care Act. But plenty of hurdles stand in the way.
Aon Hewitt’s latest retiree health care survey revealed, perhaps unsurprisingly, that more than 60 percent of employers are reassessing their long-term retiree health strategies because of the PPACA.
Aon said it found that more than a quarter of companies would consider a retiree health care “settlement strategy” for all or a portion of their retiree group, “if the market environment could support it on a cost-effective basis.”
The survey was designed “to understand plan sponsors’ current thinking and future expectations with respect to U.S. retiree health care strategies, approximately 30 months after the passage of federal health care reform.”
The data reflected an ongoing trend toward reducing or eliminating retiree health care coverage, which generally began in the early 1990s.
But now, more change is expected because, as Aon Hewitt noted, “under the new law, employer-sponsored welfare plans that cover both actives and retirees are subject to new group insurance market reforms, such as the extension of dependent coverage to age 26 and no lifetime-dollar limits on essential health benefits.”
“About half of plan sponsors have stand-alone retiree health care plans and can avoid the new group insurance market reforms for their retiree populations,” the report said. “Going forward, more plan sponsors may choose to split their legal plans in order to exempt retiree-only plans from any new group insurance market requirements that may be introduced in the future.”
Avoiding the group market will, of course, mean shifting these retirees into Medicare.
But that’s not as easily done as it might sound.