Retiree Health Benefits At the Crossroads

Introduction
  1. The Henry J. Kaiser Family Foundation analysis of the Medicare Current Beneficiary Survey 2010 Cost and Use File, and 2012 Current Population Survey.

    ← Return to text

Overview of Health Benefits for Pre-65 and Medicare-Eligible Retirees
  1. Paul Fronstin and Nevin Adams, “Employment-Based Retiree Health Benefits: Trends in Access and Coverage, 1997‒2010,” Employee Benefit Research Institute (EBRI) Issue Brief, October 2012.  http://www.ebri.org/pdf/briefspdf/EBRI_IB_10-2012_No377_RetHlth.pdf.

    EBRI estimates 25 percent of the 8.5 million non-working retirees ages 45 to 64 had retiree health benefits, based analysis of the 2010 Survey of Income and Program Participation (SIPP); this produces an estimated 2.1 million retirees.  This number is similar to the number of 55 to 64-year old non-working retirees with retiree health benefits (2.4 million), based on the Kaiser Family Foundation’s analysis of the 2012 Current Population Survey (CPS).  Neither the EBRI analysis nor the Kaiser Familiy Foundation analysis includes the spouses of retirees.

    ← Return to text

  2. The Henry J. Kaiser Family Foundation analysis of the 2008-2012 Current Population Survey.

    ← Return to text

  3. The Henry J. Kaiser Family Foundation, 2013 Employer Health Benefits Survey, August 2013. https://www.kff.org/private-insurance/report/2013-employer-health-benefits/.

    ← Return to text

  4. Mercer, Mercer’s National Survey of Employer-Sponsored Health Benefits, MTEBC, February 2013. http://benefitcommunications.com/upload/downloads/Mercer_Survey_2013.pdf.

    ← Return to text

  5. Towers Watson, Reshaping Health Care: Best Performers Leading the Way, Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, 2013. http://www.towerswatson.com/en-US/Insights/IC-Types/Survey-Research-Results/2013/03/Towers-Watson-NBGH-Employer-Survey-on-Value-in-Purchasing-Health-Care.

    ← Return to text

  6. Mercer, Mercer’s National Survey of Employer-Sponsored Health Benefits, MTEBC, February 2013. http://benefitcommunications.com/upload/downloads/Mercer_Survey_2013.pdf.

    ← Return to text

  7. Fidelity Benefits Consulting, “Retiree health costs fall,” Fidelity Viewpoints, May 15, 2013. https://www.fidelity.com/viewpoints/retirees-medical-expenses.  “Based on a hypothetical couple retiring at age 65 years or older, with average (82 male, 85 female) life expectancies. Estimates are calculated for ‘average’ retirees, but may be more or less depending on actual health status, area of residence, and longevity. Assumes individuals do not have employer-provided retiree health care coverage, but do qualify for Medicare. The calculation takes into account cost sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.”

    ← Return to text

  8. Centers for Medicare and Medicaid Services, 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, May 2013.  http://downloads.cms.gov/files/TR2013.pdf.

    ← Return to text

  9. Carlos Zarabozo and Scott Harrison, “Payment Policy and the Growth of Medicare Advantage,” Health Affairs, January 2009.  http://content.healthaffairs.org/content/28/1/w55.full.pdf+html.

    ← Return to text

  10. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, March 2014. http://www.medpac.gov/documents/Mar14_entirereport.pdf.

    ← Return to text

  11. Non-group Medicare Advantage plans receive a percentage of the difference between the bid and the benchmark in the form of a rebate, and can use the rebate to provide extra benefits or lower cost-sharing to enrollees.

    ← Return to text

  12. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, March 2014, Table 13-4. http://www.medpac.gov/documents/Mar14_entirereport.pdf.

    ← Return to text

  13. Marsha Gold, Gretchen Jacobson, Anthony Damico, and Tricia Neuman, “Medicare Advantage 2013 Spotlight: Enrollment Market Update,” The Henry J. Kaiser Family Foundation, June 2013. https://www.kff.org/medicare/issue-brief/medicare-advantage-2013-spotlight-enrollment-market-update/.

    ← Return to text

  14. Gretchen Jacobson, “Medicare and the Federal Budget: Comparison of Medicare Provisions in Recent Federal Debt and Deficit Reduction Proposals,” The Henry J. Kaiser Family Foundation, January 2014.  https://www.kff.org/medicare/issue-brief/medicare-and-the-federal-budget-comparison-of-medicare-provisions-in-recent-federal-debt-and-deficit-reduction-proposals/.

    ← Return to text

  15. Office of Management and Budget, Fiscal Year 2014 Budget of the U.S. Government, April 10, 2013.

    http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/budget.pdf. For the FY 2015 proposal, see http://www.hhs.gov/budget/fy2015/fy-2015-budget-in-brief.pdf.

    ← Return to text

  16. U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, “Medicare Program; Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs,” Federal Register, Vol. 79, No. 7, January 10, 2014.  https://federalregister.gov/a/2013-31497.

    ← Return to text

  17. Mercer, Mercer’s National Survey of Employer-Sponsored Health Benefits, MTEBC, February 2013. http://benefitcommunications.com/upload/downloads/Mercer_Survey_2013.pdf.

    ← Return to text

  18. The Henry J. Kaiser Family Foundation, Retiree Health Benefits Examined: Findings from the Kaiser/Hewitt 2006 Survey on Retiree Health Benefits, December 2006.  https://www.kff.org/health-costs/report/retiree-health-benefits-examined-findings-from-the/.

    ← Return to text

Implications of Recent Legislation for Retiree Health Coverage
  1. U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, “Early Retiree Reinsurance Program,” Federal Register, Vol. 76, No. 239, December 13, 2011. https://federalregister.gov/a/2011-31920.

    ← Return to text

  2. U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, “Early Retiree Reinsurance Program,” Federal Register, Vol. 77, No. 55, March 21, 2012. https://federalregister.gov/a/2012-6728.

    ← Return to text

  3. “‘Every employer plan since the passage of the health care law has been working to make sure their health care cost trends keep their plans under the 'Cadillac tax,' Steve Wojcik of the National Business Group on Health, a nonprofit that represents large employers, told CBSNews.com.” Cited in CBS News, “How Obamacare will change employer-provided insurance,” November 7, 2013. http://www.cbsnews.com/8301-250_162-57611192/how-obamacare-will-change-employer-provided-insurance/.

    ← Return to text

  4. Proskauer Rose LLP, “Health Care Reform Mandates: Applicability To Retiree-Only Plans, Non-Grandfathered Plans With Current Employees, And Grandfathered Health Plans,” 2010.  http://www.proskauer.com/files/uploads/Documents/Applicability-of-PPACA-to-Health-Plans.pdf.

    ← Return to text

  5. Towers Watson, “Health Care Reform: Overview and Implications,” A presentation to New York Business Group on Health (NYBGH), July 15, 2010.  http://www.nebgh.org/pdf/presentations/071510smithstone.pdf.

    ← Return to text

  6. Groom Law Group, “PCORI and Reinsurance Fees – Keeping them Straight,” Benefits Brief, June 18, 2013. http://www.groom.com/media/publication/1267_PCORI_and_Reinsurance_Fees.pdf.

    ← Return to text

  7. Towers Watson, “Transitional Reinsurance Fee — HHS Issues Final Regulation,” Health Care Reform Bulletin, March 7, 2013.  http://www.towerswatson.com/en-CA/Insights/Newsletters/Americas/health-care-reform-bulletin/2013/Transitional-Reinsurance-Fee-HHS-Issues-Final-Regulation.

    ← Return to text

  8. The standard benefit in 2014 has a $310 deductible and 25% coinsurance up to an initial coverage limit of $2,850 in total drug costs, followed by a coverage gap.  During the gap, enrollees are responsible for a larger share of their total drug costs than in the initial coverage period, until their total out-of-pocket spending reaches $4,550.  Thereafter, enrollees pay either 5% of total drug costs or $2.55/$6.35 for each generic and brand-name drug, respectively.  The standard benefit amounts increase annually by the Part D per capita spending growth rate.  For more information, see the Henry J. Kaiser Family Foundation, “The Medicare Prescription Drug Benefit Fact Sheet,” November 19, 2013. https://www.kff.org/medicare/fact-sheet/the-medicare-prescription-drug-benefit-fact-sheet/.

    ← Return to text

  9. Dale H. Yamamoto, Fundamentals of Retiree Group Benefits, ACTEX Publications, 2006.

    ← Return to text

  10. Centers for Medicare and Medicaid Services, 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, May 2013. http://downloads.cms.gov/files/TR2013.pdf.

    ← Return to text

  11. The Henry J. Kaiser Family Foundation, “Summary of Key Changes to Medicare in 2010 Health Reform Law,” April 2010. https://www.kff.org/health-reform/issue-brief/summary-of-key-changes-to-medicare-in/.

    ← Return to text

  12. Centers for Medicare and Medicaid Services, 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, May 2013. http://downloads.cms.gov/files/TR2013.pdf.

    ← Return to text

  13. Ibid.

    ← Return to text

  14. The Henry J. Kaiser Family Foundation, Retiree Health Benefits Examined: Findings from the Kaiser/Hewitt 2006 Survey on Retiree Health Benefits, December 2006.  https://www.kff.org/health-costs/report/retiree-health-benefits-examined-findings-from-the/.

    ← Return to text

  15. Frank McArdle, Susan Kornetsky, Allen Steinberg and Noel Thomas, The Retiree Health Care Challenge, prepared by Hewitt Associates for the TIAA-CREF Institute Symposium, Seeking Remedies to the Retiree Health Care Challenge, November 2006.  https://www.tiaa-crefinstitute.org/public/pdf/institute/pdf/110106.pdf.

    ← Return to text

  16. Matt Dunning, “Large health insurers plan to make cuts to their Medicare Advantage programs,” Business Insurance, August 25, 2013.  http://www.businessinsurance.com/article/20130825/NEWS03/308259985.

    ← Return to text

Emerging Strategies for Employers Offering Retiree Health Coverage
  1. Aon Hewitt, “Retiree Health Care Design and Strategy in a Post-Reform Environment: Prescription for Change,” 2013 Retiree Health Care Survey, 2013.  http://www.aon.com/human-capital-consulting/thought-leadership/healthcare/2013_Retiree_Health_Care_Survey.jsp.

    ← Return to text

  2. Towers Watson, for example, announced in August 2013 that it had entered  a web broker entity agreement with CMS through which Towers Watson “can help employers provide health insurance education and enrollment services to part-time and seasonal employees, retirees and their dependents by supporting them as they evaluate and purchase individual health plans on the federally run exchange. Towers Watson's exchange platform will seamlessly integrate with federal eligibility systems so that it can assist individuals every step of the way as they shop for and enroll in subsidized coverage through the federal exchange.”  Towers Watson, “Towers Watson Signs Agreement with Federal Government to Facilitate Public Exchange Enrollments,” August 9, 2013. http://www.towerswatson.com/en/Press/2013/08/Towers-Watson-Signs-Agreement-With-Federal-Government-to-Facilitate-Public-Exchange-Enrollments.

    Similarly, eHealth, Inc. is partnering with Aon Hewitt to provide enrollment services to employees of Aon Hewitt’s clients who choose to enroll in individual health insurance coverage. eHealthInsurance, “eHealth, Inc. Partners with Aon Hewitt to Help Employees Enroll in Individual Health Insurance,” Press Release, June 20, 2013.   http://news.ehealthinsurance.com/news/ehealth-inc-partners-with-aon-hewitt-to-help-employees-enroll-in-individual-health-insurance.

    ← Return to text

  3. Paul Fronstin and Nevin Adams, “Employment-Based Retiree Health Benefits: Trends in Access and Coverage, 1997‒2010,” Employee Benefit Research Institute (EBRI) Issue Brief, October 2012.  http://www.ebri.org/pdf/briefspdf/EBRI_IB_10-2012_No377_RetHlth.pdf.

    ← Return to text

  4. Towers Watson, The New Health Care Imperative: Driving Performance, Connecting to Value, Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, March 6, 2014. http://www.towerswatson.com/en/Insights/IC-Types/Survey-Research-Results/2014/03/towers-watson-nbgh-employer-survey-on-purchasing-value-in-health-care.

    ← Return to text

  5. National Business Group on Health,  “Large U.S. Employers Project a 7% Increase in Health Care Benefit Costs in 2014, National Business Group on Health Survey Finds,” media release, August 28, 2013. http://www.businessgrouphealth.org/pressroom/pressRelease.cfm?ID=214.

    ← Return to text

  6. Dale H. Yamamoto, FSA, “Retiree Medical Issues Post-Health Care Reform,” Society of Actuaries 2011 Annual Meeting & Exhibit, Session 59, October 16-19, 2011.  http://www.soa.org/Professional-Development/Presentations-Archive/2011/2011-Annual-Meeting---Exhibit.aspx.

    ← Return to text

  7. Centers for Medicare and Medicaid Services, 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, May 2013. http://downloads.cms.gov/files/TR2013.pdf.

    ← Return to text

  8. Louise Kertesz, “Drug benefit reviewed by employers due to tax change,” Business Insurance, May 6, 2012. http://www.businessinsurance.com/article/20120506/NEWS03/120509908#full_story.

    ← Return to text

  9. Aon Hewitt, “Retiree Health Care Design and Strategy in a Post-Reform Environment: Prescription for Change,” 2013 Retiree Health Care Survey, 2013.  http://www.aon.com/human-capital-consulting/thought-leadership/healthcare/2013_Retiree_Health_Care_Survey.jsp.

    ← Return to text

  10. According to an analysis by PricewaterhouseCoopers, this approach could reduce employers’ pre-tax cash cost by 20 percent or more, relative to the RDS program.  See PricewaterhouseCoopers, “EGWP + Wrap Drug Plans Present Savings Opportunities for Employers,” September 3, 2010. http://www.equityplanner.pwc.com/HRS/EquityPlanner/EPv1.nsf/10a76c5ebfac5dc685257528007b434e/
    db6d377288d91df8852577970069211a?OpenDocument
    .

    ← Return to text

  11. Aon Hewitt, “Retiree Health Care Design and Strategy in a Post-Reform Environment: Prescription for Change,” 2013 Retiree Health Care Survey, 2013.  http://www.aon.com/human-capital-consulting/thought-leadership/healthcare/2013_Retiree_Health_Care_Survey.jsp.

    ← Return to text

  12. National Business Group on Health, “Employers Plan Aggressive Response to Shifting Health Care Landscape, Towers Watson/National Business Group on Health Survey Finds,” March 7, 2013 http://www.businessgrouphealth.org/pressroom/pressRelease.cfm?ID=208.

    ← Return to text

  13. Aon Hewitt, “Retiree Health Care Design and Strategy in a Post-Reform Environment: Prescription for Change,” 2013 Retiree Health Care Survey, 2013.  http://www.aon.com/human-capital-consulting/thought-leadership/healthcare/2013_Retiree_Health_Care_Survey.jsp.

    ← Return to text

  14. Matt Dunning, “PwC teams with employer groups to evaluate private health exchanges,” Business Insurance, October 25, 2013. http://www.businessinsurance.com/article/20131025/NEWS03/131029852?tags=58|376|278|79|74#.

    ← Return to text

  15. Ibid.

    ← Return to text

  16. Towers Watson, “Towers Watson Announces OneExchange, a Health Benefit Solution for Full-Time and Part-Time Employees, and Pre-65 and Medicare Retirees,” January 31, 2013. http://www.towerswatson.com/en-US/Press/2013/01/Towers-Watson-Announces-OneExchange-Health-Benefit-Solution-FT-PT-Employees-Pre-65-Medicare-Retirees.

    ← Return to text

  17. See AON, “Q4 2013 Aon plc Earnings Conference Call,” Edited Transcript, January 31, 2014. http://ir.aon.com/phoenix.zhtml?c=105697&p=quarterlyearnings13.

    ← Return to text

  18. Mercer offers its Medicare solution through either Optum’s myCustomHealthTM private exchange platform or UnitedHealthcare’s Connector Model for retirees. Mercer, “Mercer Signs Up 52 Employers For Its Private Exchange Platforms, Including Petco And Kinder Morgan,” October 15, 2013. http://www.mercer.com/private-exchange-clients.

    ← Return to text

  19. Personal communication between Frank McArdle and Edward Gadowski, Media Relations Manager at Buck Consultants, February 27, 2014.

    ← Return to text

  20. Steve Zaleznick and Peter Barth, Comparing Two Leading Private Online Exchanges to Government Plan Finders Shows Gaps, June 3, 2013.  http://www.healthpocket.com/healthcare-research/infostat/comparing-two-leading-private-online-exchanges-to-government-plan-finders-shows-gaps#.UoErnm8o6pr.

    ← Return to text

  21. Towers Watson, “Towers Watson Launches Turnkey Retiree Medical Exit Solution,” March 24, 2014. http://www.towerswatson.com/en/Press/2014/03/towers-watson-launches-turnkey-retiree-medical-exit-solution.

    ← Return to text

The Current Policy Debate: Implications for Retiree Health
  1. Congressional Budget Office, Options for Reducing the Deficit: 2014 to 2023, November 2013. http://www.cbo.gov/sites/default/files/cbofiles/attachments/44715-OptionsForReducingDeficit.pdf.

    ← Return to text

  2. Tricia Neuman, Juliette Cubanski, Daniel Waldo, Franklin Eppig, and James Mays, Raising the Age of Medicare Eligibility: A Fresh Look Following Implementation of Health Reform, The Henry J. Kaiser Family Foundation, July 2011. https://www.kff.org/medicare/report/raising-the-age-of-medicare-eligibility/.

    ← Return to text

  3. Ibid.

    ← Return to text

  4.     Congressional Budget Office, Options for Reducing the Deficit: 2014 to 2023, November 2013. http://www.cbo.gov/sites/default/files/cbofiles/attachments/44715-OptionsForReducingDeficit.pdf.

    ← Return to text

  5. Ibid.

    ← Return to text

  6. Juliette Cubanski, Tricia Neuman, Zachary Levinson, Monica Brenner, and James Mays, Restructuring Medicare’s Benefit Design: Implications for Beneficiaries and Spending, The Henry J. Kaiser Family Foundation, November 2011.  https://www.kff.org/medicare/report/restructuring-medicares-benefit-design/.

    ← Return to text

  7. The study did not address any steps that could be taken to potentially have a lower spending limit without producing significant employer plan savings. Nor have  the proposals specifically said it but in theory, at least, lawmakers could just not count toward the Medicare beneficiary’s cost sharing limit any payments made by the retiree health plan using a concept analogous to the so-called True Out of Pocket Limit under Medicare Part D. If such an approach were adopted, many fewer retirees would hit the annual cost sharing limit. For retiree health plans supplementing traditional Medicare, that would reduce any potential retiree health plan savings that would otherwise potentially offset the added cost from the unified Part A/B deductible and the new coinsurance.

    ← Return to text

  8. Jonathan Gruber, for example, has proposed an excise tax of up to 45% on Medigap premiums and on employer-sponsored retiree coverage for Medicare-eligible retirees, in “Proposal 3: Restructuring Cost Sharing and Supplemental Insurance for Medicare,” 15 Ways to Rethink the Federal Budget, The Hamilton Project, Brookings Institution, February 2013. http://www.hamiltonproject.org/files/downloads_and_links/THP_15WaysFedBudget_Prop3.pdf.

    ← Return to text

  9. Medicare Payment Advisory Commission, Report to the Congress: Medicare and the Health Care Delivery System, June 2012. http://www.medpac.gov/documents/Jun12_EntireReport.pdf.

    ← Return to text

  10. As CBO, in discussing the surcharge on first-dollar Medigap option, also acknowledges. Congressional Budget Office, Options for Reducing the Deficit: 2014 to 2023, November 2013. http://www.cbo.gov/sites/default/files/cbofiles/attachments/44715-OptionsForReducingDeficit.pdf.

    ← Return to text

  11. See for example the recommendations of the Bipartisan Policy Center as summarized by Sheila Burke, “Health Cost Containment Initiative – Medicare Benefit Modernization Proposals,” Streamlining Cost Sharing in Medicare: The Impact on Beneficiaries, Alliance for Health Reform Briefing, July 22, 2013. http://www.allhealth.org/briefingmaterials/burkepresentation_qe.pdf.

    ← Return to text

  12. Congressional Budget Office, Options for Reducing the Deficit: 2014 to 2023, November 2013. http://www.cbo.gov/sites/default/files/cbofiles/attachments/44715-OptionsForReducingDeficit.pdf.

    ← Return to text