Retiree Healthcare Benefits No Longer an All-or-Nothing Strategy for Employers
The economic downturn, the ever-rising cost of health benefits for active employees and the uncertainty about pending federal healthcare reform legislation have compelled U.S. employers to shift more and more of the cost of health benefits to retirees and, in some cases, even to eliminate retiree health benefits entirely.
The burden will become even greater when Baby Boomers begin to turn 65 next year, and will continue to grow. According to estimates from the Federal Interagency Forum on Aging-related Statistics, the number of adults age 65 and older will double in size from the year 2000 to reach 71.5 million by the year 2030, when retirees will make up nearly 20 percent of the total U.S. population.
However, according to Jane S. Funk, National Vice President for UnitedHealthcare Retiree Solutions, this growing need for retiree benefits no longer requires employers to take an all-or-nothing stance--either paying for health coverage or cutting retiring employees off. UnitedHealthcare offers significant opportunities for employers to provide retiree benefits, help employees transition to Medicare and, at the same time, save employers money and improve the effectiveness and affordability of retirees' coverage.
"Retiree benefits used to be almost an afterthought for employers, and something employees expected," says Funk. "But now the number of retirees is growing exponentially, and employers are looking for valid options to sustain financial viability and provide choice to the retirees they serve."
This year alone, health benefit costs for retirees are expected to increase some 6 percent for pre-65 retirees and some 4 percent for post-65 retirees, according to a Towers Watson 2010 Retiree Health Care Cost Survey. Among surveyed employers, the total annual cost for pre-65 retiree health coverage has increased 6 percent, to $7,596 for a single retiree in 2010, compared to $5,184 for a single active employee. The 2010 cost for family coverage for the increasing group of retirees that still has dependent children is $19,596, nearly 31 percent more than comparable costs for family coverage for active employees.
In plans that offer an employer subsidy, the subsidy covers less than half of the total cost, on average, and typically does not increase to keep up with inflation.
Some employers are converting from traditional employer-sponsored plan offerings to new defined-contribution subsidy models, while others are eliminating employer subsidies altogether.
But Funk says there is another innovative strategy that combines high-touch retiree transition services with fully insured individual health insurance options.
Called the Connector Model, this new strategy helps connect retirees to individual health coverage options based on their needs, and helps employers lower their costs and administrative challenges.
"As the population is aging and the demand for services is growing, UnitedHealthcare's Connector Model allows employers to 'hand off' the plan administration burden while still offering meaningful retiree plan choices without overwhelming the retiree," says Funk.
The Connector Model combines available individual Medicare plans, robust retiree decision-support tools and experienced customer service teams to help retirees understand their choices and feel confident about the decisions they make.
For retirees who are turning 65 and becoming eligible for Medicare, the transition from active employer group coverage to Medicare, and the extensive array of medical and drug plan choices can feel overwhelming. UnitedHealthcare offers a program that helps ease the transition for these retirees. Working with employers, UnitedHealthcare identifies the best outreach and high-touch service model to support employees turning 65 and retiring.
Easy transition to Medicare includes education and resources specifically designed to help retirees learn about Medicare, how it works, what it covers and what types of plans are available to fill in benefit gaps not covered by Medicare. UnitedHealthcare helps retirees evaluate different plan options and enroll in one of its plans, if they choose to. Signing up is easy and can be done by telephone, online or by a paper application.
UnitedHealthcare is one of the nation's largest health insurers with more than 25 years of experience in Medicare plan options. It serves one in five Medicare beneficiaries, offering a broad range of individual and group-sponsored Supplement plans, Medicare Advantage plans and Medicare Part D plans including plans that carry the AARP name, for retirees 65 years of age or older.
Thousands of employers, union groups and individual post-65 retirees have chosen to enhance their retirees' coverage through supplemental insurance plans that complement traditional Medicare benefits. UnitedHealthcare offers both group supplement insurance and Medicare Supplement insurance including:
AARP Medicare Supplement Insurance Plans are insured by UnitedHealthcare Insurance Company.(1) For retirees age 65 and older who are enrolled in both Medicare Parts A and B, these plans offer a variety of choices to supplement their original Medicare plan and reduce their healthcare costs. These plans offer retirees the access and freedom to choose any doctor or hospital--no referrals or networks; predictable out-of-pocket costs; portability so that coverage follows when traveling or moving within the United States; competitive pricing and guaranteed renewal.
Senior Supplement Plans are group major medical insurance coverage for Medicare-eligible retirees. They help pay for the costs recognized but not covered by Medicare Parts A and B. Plans are guaranteed-issue with designs replicating the federal standard Medigap plans, and the premium is a flat (blended) amount for all participants nationwide. Senior Supplement plans have no provider network, so retirees can go to any provider who accepts Medicare.
Senior Security Plans provide group major medical insurance coverage for Medicare-eligible retirees. Senior Security plans are variations of Senior Supplement plans, and they help pay for the costs recognized but not covered by Medicare Parts A and B. Once the deductible is met, the out-of-pocket limit is also satisfied.
Medicare Advantage Plans
Medicare Advantage (MA) plans or Medicare Part C plans are privately insured and administered healthcare plans for Medicare beneficiaries. Medicare Advantage combines Medicare Part A (hospital), Part B (outpatient services) and, optionally, Medicare Part D (prescription drugs) into a single plan. These plans can be offered as Health Maintenance Organizations (HMO) where care is provided through a network of local contracted doctors and hospitals. These plans generally do not provide coverage outside the network of contracted providers except in emergencies. Other options include Preferred Provider Organization (PPO) and Point of Service (POS) plans that allow members to choose between in-network and out-of-network providers.
UnitedHealthcare has one of the largest and longest-serving Medicare Advantage programs in the nation, with local plans available in 70 markets across 40 states as well as regional and national plans. Medicare Advantage plans can offer more competitive premiums than traditional retiree plans, are fully insured and cover more benefits than original Medicare.
Part D Prescription Drug Plans
UnitedHealthcare's Medicare Part D can save employers time and money, while preserving prescription drug benefits. UnitedHealthcare's Part D prescription drug plans offer reduced administrative effort from employers, and greater potential savings than commercial plans or the Retiree Drug Subsidy (RDS).
How to Pay for Retiree Benefits Plans
To help retirees with the cost of purchasing individual health insurance products, employers can establish tax-advantaged individual retiree reimbursement accounts (RRA). UnitedHealthcare's RRA product (offered by Optum Bank, a wholly owned subsidiary of UnitedHealthcare) provides automated monthly premium payments for retirees enrolled in one of UnitedHealthcare's products. This unique feature reduces paperwork and creates a viable process for funds transactions. Under this plan, employers can also allow reimbursement of out-of-pocket costs, such as copays.
In addition, RRAs also give retirees greater flexibility by allowing them to use their subsidy dollars to choose the type of health plan coverage that makes the most sense for them, instead of having the employer choose for them. "We fully support the retiree with any combination of products and support services to ensure a long-term favorable experience," said Funk.
For more information, please contact Don Cosenza at (860) 702-8212.
1. United HealthCare Insurance Company pays a royalty fee to AARP for use of the AARP intellectual property. Amounts paid are used for the general purposes of AARP and its members. Neither AARP nor its affiliate is the insurer. AARP contracts with insurers to make coverage available to its members.
AARP does not recommend health related products, services, insurance and programs. You are strongly encouraged to evaluate your needs.
AARP Medicare Supplement Insurance Plans are insured by UnitedHealthcare Insurance Company, Ft. Washington, PA, (UnitedHealthCare Insurance Company of New York for New York residents, Islandia, NY) under Policy Form # GRP79171 GPS-1 (G-36000-4). They are not connected with or endorsed by the U.S. Government or the Federal Medicare Program.
(The above piece is part of our continuing Perspectives series designed to highlight key products and services to our readers. This paid-for Insights was written and edited by Risk & Insurance®
on behalf of our marketing partner. Additional Perspectives can be found on our Web site at www.riskandinsurance.com/.)
February 1, 2010
Copyright 2010© LRP Publications