Medicare Advantage plans continue to appeal to retirees

About 17.7 Medicare beneficiaries are enrolled in a Medicare Advantage plan now, compared with nearly 16.5 million people in September 2014, according to the CMS. About 31% of eligible beneficiaries are enrolled in a MA plan, compared with 13% a decade ago, according to the Kaiser Family Foundation, and a Health Affairs survey found that more than half of new Medicare enrollees chose an MA plan this year. BenefitsPro.com (9/17)

Employees Need Customized Benefit Communications

A survey by The Guardian reveals that employees prefer benefit communications that are customized to their needs. Early entrants to the workforce (those within the first five years of working) want more choice and education in the workplace. Near-retirees (those within five years of retirement) value their benefits and worry about losing them in retirement.

Early entrants have a strong desire for financial education and guidance to help them focus on their immediate financial needs, such as paying bills, job security, work/life balance, and reducing debt. Nearly two-thirds of these younger workers say that buying insurance and saving for retirement through their employer is easier than doing it on their own, and 56% prefer learning about financial planning and products at work compared to 44% of those near retirement.

Near-retirees are most concerned about maintaining adequate health insurance, having a comfortable retirement, staying healthy, and having enough savings. While 93% of respondents in this age group say that it’s important to have retirement savings that last as long as needed, only 62% say they have achieved this goal.

Sixty percent of all employees say that their benefit meetings would be more relevant if they were targeted by age. Those within the first five years of working need more personal advice during enrollment. If employers increase access to education and advice, it can benefit the nearly 70% of early entrants who say that it is very important to find a trusted source of financial advice. Unfortunately, only 33% of employers place high importance on tailored communications, and only 13% have implemented such an approach

Companies Look to Transition Retirees to Health Exchanges

Two-thirds of companies are considering altering their pre-65 retiree health strategies over the next few years, according to a new Aon Hewitt survey. Of those, 35% are favoring sourcing health coverage through the public exchanges under a defined contribution approach. Twenty-eight percent are considering eliminating pre-65 retiree coverage and subsidies altogether.

Just six percent of companies have decided to move some portion of their pre-65 retirees to the public exchanges, and another nine percent offer retirees a choice between the group program and the public exchanges.

John Grosso of Aon Hewitt said, “Most companies are looking closely at altering their pre-65 retiree strategies to reduce cost and relieve the looming excise tax risk facing employers and retirees, but they are waiting on the outcome of the King v. Burwell U.S. Supreme Court case before taking action. Health exchanges are attractive because they enable companies to take advantage of the health care efficiencies found in the individual market; when you have efficiency on top of competition, you will see better financial outcomes for both companies and retirees.”

Eighty-four percent of companies plan to make changes to their pre-65 retiree strategies to mitigate the excise tax on high cost employer health plans when it goes into effect in 2018. Of those, 23% favor sourcing coverage through the exchanges under a defined contribution approach. Employers are also considering these strategies:

  • Reducing costs by managing copays and deductibles or having a health savings account (HSA)/High-Deductible Health Plan (HDHP) strategy (32%).
  • Changing retiree premium cost sharing requirements (19%).
  • Eliminating pre-65 coverage (8%).

Employers are likely to follow the trends already occurring in the post-65 retiree space. Fifty-eight percent of companies are reassessing their long-term post-65 retiree health strategies. More than 33% of companies that have decided to make changes have moved forward to direct post-65 retirees to an exchange, often accompanied by a defined contribution subsidy. Thirty-three percent of the companies that expect to make changes to their post-65 retiree strategies indicate strong interest in this approach.

Cary Grace, CEO of Aon Exchange said, “Companies that transition post-65 retirees to a private retiree health exchange are generally providing subsidies that allow the vast majority of retirees to buy at least comparable coverage to their group plan, with many retirees finding greater value in the individual market. This benefit, coupled with the high-touch customer service model and data-driven tools offered by the Aon Retiree Health Exchange, helps retirees find a plan that best meets their needs.”

Non-Recurring Health Services Are Most Costly to Retirees

A study by the Employee Benefit Research Institute (EBRI) looked at how retirees spend their out-of-pocket money on health care. Recurring health-care services remain stable throughout retirement while non-recurring ones increase with age and tend to be more expensive.

Sudipto Banerjee, EBRI research associate and author of the report said, “Health care…is the only part of household expenditures that increases with age. While some of these costs are more predictable, others are uncertain, and for many people these expenses spike toward the end of life when resources are slim. To successfully manage your resources in retirement, a good plan may include separate preparations for each.”

In 2011, average annual out-of-pocket health care cost for a household with members 65 to 74 years old was $4,383, accounting for 11% of total household expenses. That increases for households ages 85 and above to $6,603 a year, or 19% of total household expenses.

The average annual expenditure for recurring health care expenses was $1,885 among the Medicare eligible population. Assuming a 2% rate of inflation and 3% rate of return, a person with a life expectancy of 90 would need $40,798 at age 65 to fund their recurring health care expenses. This does not include expenses for insurance premiums or over-the-counter medications.

Non-recurring health care services increase with age. In particular, nursing-home stays can be very expensive. Not surprisingly, the costs of nursing home stays, home health care, and overnight hospital stays are much higher in the period preceding death. More than 50% in every age group above 65 received in-home health care from a medically trained person before death. For those 85 and above, 62.3% had overnight nursing-home stays before death and 51.6% were living in a nursing home before death. Women over 85 have significantly higher nursing-home use. But the rest of the differences between men and women are small

Employers Say That the ACA Has Affected Their Retirement Plans

Forty-five percent of employers expect the Affordable Care Act (ACA) to change their retirement benefit strategy and spending, and 43% say it already has. Fifty-five percent of those who say the ACA has changed their strategy are spending less on retirement benefits and shifting costs to employees while 42% are spending less time evaluating their retirement benefits. Alison Salka of LIMRA said, “Employers have limited resources to manage their employees’ comprehensive benefits package. The added complexity and costs of health care are definitely taking a toll on employers’ ability to manage their retirement savings plans. As a result, employers are looking for more support from the industry to help them provide a comprehensive retirement savings program for their employees.” Cost-shifting is more prevalent among employers that offer a defined benefit plan and defined contribution plan (67% versus 48%). Sixty-three percent of those how expect the ACA to affect their retirement plan strategies and spending say it will mean less money spent on retirement plans. For more information, visitwww.secureretirementinstitute.com.

Middle-Income Retirees Say What’s Best and Worst about the Affordable Care Act

A majority of middle-income retirees say that the best aspects of the Affordable Care Act are that it eliminates pre-existing condition exclusions (68%); offers a free Medicare annual wellness visits (60%); and includes initiatives to make Medicare more efficient (60%).

However, 52% say that one of the worst aspects of the Affordable Care Act (ACA) is the requirement that individuals own health insurance or pay a penalty, according to a latest survey by the Bankers Life. One in six retirees are not aware that ACA caps health insurance premiums for older people relative to rates for younger people (18%) or that it will close the Medicare Part D prescription drug donut hole (18%).

Twenty-three percent of middle-income retirees say they retired due to a health issue or disability. Therefore, many retired Americans under 65 will turn to the newly formed state exchanges for health insurance coverage until they are old enough to qualify for Medicare.

Twenty-seven percent of middle-income retirees ages 55 to 64 who don’t get any government insurance coverage have purchased their own private health insurance policy (15%) or don’t have health insurance (12%). In fact, slightly more retirees ages 55 to 65 are potential beneficiaries of the state health insurance exchanges compared to those in the working population. Forty-two percent of middle-income retirees (ages 55 to 65) have looked into the cost of getting health insurance through an exchange or will do so. For more information, visit www.CenterForASecureRetirement.com.

Individual Medicare Market to Get a Boost

Many employers are sourcing post-65 retiree health care coverage through the individual Medicare plan market or are considering doing so, according to a survey by Aon Hewitt. The ACA is causing more than 60% of employers to reassess their long-term retiree health strategies.

More than 40% companies that have decided to change their strategy for post-65 retirees are now directing retirees to the individual market for coverage, often accompanied by a defined contribution subsidy. More than half of companies that expect to change their post-65 retiree strategies indicate strong interest in this approach.

Maureen Scholl, CEO of Health Care Exchanges for Aon Hewitt said, “Individual market-based retiree health care sourcing strategies can create significant savings opportunities for all stakeholders. We expect to see many employers apply these strategies where possible and supplement them with modified group-based programs for those retiree populations where individual strategies do not make sense.”

Fifty-three percent of employers have altered or their Medicare Part D benefit strategies or plan to do so. Thirty-six percent of companies that have made changes, since 2010, have moved to a group-based Medicare Part D plan and another 21% anticipate doing so.

In 2013, 48% of of employers filed to collect the federal Medicare Part D Retiree Drug Subsidy compared to 63% in 2010. Only 18% plan to file for the subsidy longer-term. Milind Desai, retirement actuary at Aon Hewitt explained that employees had the impetus to take action with the elimination of the tax-favored status of the Retiree Drug Subsidy for 2013 and ACA-prescribed improvements to the Medicare Part D program. While many employers will continue to rely on group-based sourcing, they are likely to migrate toward more cost effective sourcing, he said.

Only 34% of employers offer local/regional or national group-based Medicare Advantage plans, and just 6% consider Medicare Advantage to be a viable group-based strategy. However, 38% of employers say they would consider replacing their group-based Medicare medical indemnity supplement strategies with a national Medicare Advantage PPO if there would be no change in retiree benefits and if it would generate near-term savings.

John Grosso, leader of Aon Hewitt’s Retiree Health Care task force said, “While ACA introduced a number of changes to the Medicare Advantage program, employers generally want to see consistent performance over time and a stable federal funding commitment before investing in these group-based strategies for the long-term.”

Some settlement strategies with a retiree benefit buy-out enable employers to eliminate their retiree medical commitment completely or in part. Employers are considering the following strategies: purchasing life annuities to provide a fixed income stream in lieu of ongoing medical coverage, establishing and funding a VEBA trust to support continued retiree benefits, or making direct cash lump-sum payments to retirees.

More than a quarter of companies say they would consider a retiree health care settlement strategy for all or a portion of their retiree group if it were cost-effective. Desai said, “We saw tremendous pension settlement activity during 2012, and that trend is continuing in 2013. Companies looking to shrink benefit liabilities…can explore…settling their retiree health care obligations as well…There are a number of tax, legal and market hurdles that limit the feasibility of settling retiree medical program commitments in a cost-effective manner, but this can change in the future.” For more information, visitwww.aonhewitt.com.

Last Updated 04/14/2021

Arch Apple Financial Services | Individual & Family Health Plans, Affordable Care California, Group Medical Insurance, California Health Insurance Exchange Marketplace, Medicare Supplements, HMO & PPO Health Care Plans, Long Term Care & Disability Insurance, Life Insurance, Dental Insurance, Vision Insurance, Employee Benefits, Affordable Care Act Assistance, Health Benefits Exchange, Buy Health Insurance, Health Care Reform Plans, Insurance Agency, Westminster, Costa Mesa, Huntington Beach, Fountain Valley, Irvine, Santa Ana, Tustin, Aliso Viejo, Laguna Hills, Laguna Beach, Laguna Woods, Long Beach, Orange, Tustin Foothills, Seal Beach, Anaheim, Newport Beach, Yorba Linda, Placentia, Brea, La Habra, Orange County CA

12312 Pentagon Street - Garden Grove, CA 92841-3327 - Tel: 714.638.0853 - 800.731.2590
Email:
Jay@ArchApple.com
Copyright @ 2015 - Website Design and Search Engine Optimization by Blitz Mogul