I ran across this article on the front page of the September 10, 2013 AJC and thought that it would help inform you of what other businesses are implementing in order to better serve retiree health coverage issues.
Posted: 6:25 p.m. Monday, Sept. 9, 2013
By David Markiewicz - The Atlanta Journal-Constitution
Joining a small but growing trend in health care, Time Warner, parent of Atlanta-based Turner Broadcasting System, is moving its retirees’ medical benefits to the private insurance marketplace.
Experts say the shift will help the company hold down costs and give retirees more control of their coverage, though one group expressed concern about retirees’ ability to maintain coverage over time.
The company notified its retirees in an internal memo this month.
Retirees will still get money to help buy insurance but will have to research and choose from among a range of plan options offered through Extend Health, a Utah-based insurance marketplace called an exchange. The goal is to encourage competition among insurers and hold down costs.
Time Warner has been providing an indirect subsidy through a supplementary Medicare program, but as of Jan. 1 it will direct funds to an account called a Health Reimbursement Arrangement (HRA) that retirees can use to buy insurance on the private exchanges.
IBM recently announced a similar change.
A key concern is whether employers who make the shift will contribute enough that retirees will be able to afford the same or better coverage at an equal or lower price, said Ariel Gonzalez, director, federal health and family government affairs for AARP.
“We need to focus on how these dollars are going to cover core health care costs over time,” he said. “Will these dollars translate into affordable health care coverage for retirees going forward? We need to look at costs being shifted onto retirees.”
The memo from Time Warnter stated: “Over the last few years, as a result of certain improvements spurred by Health Care Reform, the individual marketplace for health care coverage that supplements Medicare has expanded, and now provides retirees access to affordable plans that meet a broad range of individual needs.
The shift “… will ultimately be beneficial for all retirees by providing more choice of coverage … for, in many cases, a lower cost,” wrote James Cummings, Time Warner’s senior vice president of global compensation and benefits.
Details about the allocation to the HRAs will be available during open enrollment, according to the memo.
Time Warner would not comment further. It’s unclear how many Turner Broadcasting retirees would be affected.
A growing number of large corporations are trying to lower retiree health benefits costs, and moving retirees to private exchanges is one method.
Employer-paid retiree health care has been on a long decline.
According to health and benefits consultant Mercer, 17 percent of companies with 500 or more employees offered Medicare-eligible retirees a medical plan in 2012, down from 40 percent in 1993. For pre-Medicare eligible employees, 24 percent of large employers offered it last year, down from 46 percent in 1993.
Bryce Williams, managing director of Towers Watson Exchange Solutions which runs Extend Health, said only 10 percent of companies that still subsidize retiree health care have made the shift to private exchanges. But the company now has 300 clients, including 42 Fortune 500 companies.
Employers are not obliged to provide retiree health benefits and, unlike pensions, employers don’t pre-fund them. As a result, employers are expected to continue to make changes to these programs.
Employers who don’t drop the benefit have raised premiums retirees must pay, reduced benefits and tightened eligibility requirements.
For companies, the exchange option allows them to continue to provide retirees with health care benefits while knowing what their annual cost will be: the amount they choose to contribute to the retiree’s account.
Previously, as sponsors of the coverage, they were subject to rate increases imposed by insurance carriers.
Retirees look to company health benefits before Medicare kicks in at 65, and to supplement it after that if it does not cover all medical expenses.