Human Resources
2014 Retiree Health Care Survey

2014 Retiree Health Care Survey


Retiree Health Care Design and Strategy in a Post-Reform Environment: Continued Growth on Exchange Based Strategies

The employer-sponsored retiree health care market continues to rapidly evolve, four years after the largest transformation to the national health care system since the introduction of Medicare and Medicaid in 1965.

Federal health care reform has created the impetus for change at a time when escalating health care costs and benefit liabilities threaten to crowd out other mission-critical investments that plan sponsors need to make in the current economic and competitive environment.

Plan sponsors are finding that new strategies can create significant savings opportunities for all stakeholders, and allow them to effectively reposition their retiree health care programs for the future. Creative solutions have emerged to support these new strategy options, with a variety of new products and services designed to take full advantage of health care reform.

Specifically, individual market exchange-based strategies to support retiree benefits continue to gain prominence in the market. These strategies often include a “defined contribution” subsidy, which allows the plan sponsor to gain better control over ongoing program costs while taking advantage of new efficiencies in the market. This movement is well under way for Medicare–eligible participants, and is beginning to slowly emerge for pre-Medicare retirees, coincident with the introduction of the new 2014 state and federal marketplaces.

Additionally, many plan sponsors have taken steps to pursue other strategies, including:

  • Moving from a Retiree Drug Subsidy (RDS) strategy to a Medicare Part D Employer Group Waiver Plan (EGWP) to leverage additional sources of Medicare Part D funding brought about by health care reform;
  • Converting their group-based, secondary-paying post-65 retiree medical indemnity plan to a Medicare Advantage medical plan to preserve benefits and reduce cost; and
  • Taking steps to mitigate future excise taxes that begin as early as 2018, but must be reflected in plan liabilities today.

If plan sponsors have not done so already, the time is now to review current retiree health care strategies and consider alternatives for the future that better support cost and risk management objectives, while continuing to support key retiree benefit commitments.

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