A growing number of employers are moving Medicare-eligible retirees to special retiree medical exchange platforms. Mercer’s National Survey of Employer-Sponsored Health Plans found that 27% of retiree plan sponsors are using an exchange to provide coverage to Medicare-eligible retirees in 2016, up sharply from just 15% two years ago. The programs are attractive because they offer a wider range of choices for retirees and also take on benefit administration.
Now, the combination of the public exchange and expansion of the individual market off-exchange has opened up opportunities for pre-Medicare-eligible retirees as well. The individual marketplace for pre-65 retirees is evolving. Characteristics typically associated with the Medicare marketplace -- rate stability, standardized plans, carrier availability and longevity -- appear to be more challenging in the pre-65 market.
Recently, several insurance companies have announced their plans to exit the public exchange in certain markets, raising questions with employers about the availability of exchange coverage and off-exchange coverage for pre-65 retirees. Michelle Andrews recently addressed this question in Kaiser Health News. While some states, like the District of Columbia, require the insurance company to offer coverage on the public exchange in order to offer coverage off-exchange, that is not true in every state. But while carrier participation in the pre-65 market has fluctuated, with some national carriers leaving the market or scaling back on their higher value plans, the total number of carriers has remained relatively balanced, as new entrants and smaller, regional carriers gain market presence.
Typically, employers considering a move to a pre-65 retiree exchange are seeking reductions in cost, risk, and administrative burden for this population. Or, based on a geographic footprint analysis, they have found that their pre-65 retirees will likely see savings and choice in the individual market. Often both are the case. It’s important to keep in mind that pre-65 individual coverage options may offer advantages over traditional group insurance in terms of participant personalization of choice and employer administration relief. Issues arising in a handful of markets around the country shouldn’t necessarily mean putting the brakes on a strategy to move retirees out of group plans when there may be a better alternative for them and the organization.
Given that this is an election year and the political landscape surrounding health care reform has been heating up, we can expect little change or significant change in the Affordable Care Act regulations depending on which party gains control of the Senate, House of Representatives, and the White House. For now, the public exchanges are in flux and could create challenges in the pre-65 retiree demographic. For employers looking for alternatives to a traditional group plan for pre-65 retirees, it’s important to do your homework.
July 30 marks the 50th anniversary of the law that created Medicare and Medicaid. Let’s take a look at how much has changed since the programs were first conceived — and also at the role they play in employer-sponsored health care.
Medicare — When Medicare was established in 1965, as Federal health insurance for the elderly or disabled, there were fewer than 20 million Americans over the age of 65. Nearly half of them were uninsured, and the elderly population was viewed as politically disconnected. Today, Medicare covers 55 million people — one in six Americans. Each day 10,000 more people become eligible, while the number of workers paying the tax to fund the program decreases. And these seniors are “uber-citizens” who can’t be ignored. They are a political force to be reckoned with, and their health coverage is of great importance to them. Half of the covered individuals have four or more chronic conditions. When the George W. Bush administration expanded Medicare coverage to include prescription drugs, many employers decided to discontinue sponsoring plans for retirees over age 65.
Medicaid — Medicaid was originally intended only to provide coverage to children, pregnant women, and disabled persons. After the ACA expanded the scope of Medicaid to include residents with incomes as high as 133% of the Federal poverty level, the Supreme Court decided states could have the option to expand coverage or not, and 20 have chosen not to expand. Even so, a whopping 70 million people are enrolled — that’s one in four Americans. The annual cost of $500 billion is shared between the Federal government and states, where it tends to be one of the largest budget items. States manage cost by cutting payment rates to providers or reducing benefits, creating access challenges for members. As a potential coverage option for low-paid and part-time employees, Medicaid takes some of the pressure off employer-sponsored plans to provide affordable coverage to all.
What lies ahead for these landmark programs, and how can employers prepare? Consider that Medicaid is the only safety net for millions of middle-class people who need long-term care at home or in nursing homes — in fact, more than 60% of nursing home residents rely on Medicaid for assistance. Not surprisingly, Medicaid programs are working to shift people from costly nursing homes to less costly services at home or in community settings. Your employees should consider what they would want for their parents, or themselves, should they need this type of assistance. Advance planning for long-term care is a good thing to include in financial wellness coaching.
Medicare and employer programs have a symbiotic relationship. According to the Urban Institute, reducing the rate of chronic disease by just 5% would save Medicare and Medicaid $5 billion per year by 2030; 25% reduction would save $26.2 billion per year. Employer investments to help workers avoid and/or manage chronic conditions have the potential to contribute to significant savings. At the same time, the vast purchasing power of Medicare has the potential to move the market in productive ways. In 2014, 20% of Medicare spending ($72 billion) went to providers under contracts that gave them incentives to coordinate care to drive better quality and lower costs. This effort is parallel to employer efforts to utilize Accountable Care Organizations and patient-centered medical homes to achieve the same goals. The more pressure on providers to provide care this way, the faster we will be able to make progress.