There is a significant movement among private sector employers to shed retiree health care obligations by moving retirees to the market for individual policies. Employers may or may not provide funds for them to purchase insurance policies on their own. This approach is labeled the “Medicare Exchange” model and there are several companies that specialize in facilitating this process.
Moving retirees on to the individual market often entails a significant change in the benefits philosophy of a corporation. Many benefits managers and HR professionals feel that, given economic constraints, they have no viable alternative to this strategy despite the disruptions and loss of benefits that it can entail. Often, third-party facilitators present this process as being relatively painless to the retiree. For more details on the problems that retirees can face see our previous blog post: Extend Health and the Medicare Exchange Model.
There is an alternative strategy that can achieve corporate cost reduction goals and protect the retirees. Retiree populations represent an affiliated group that can be underwritten by any number of Medicare supplement insurance providers. If a group plan is secured retirees will not have to experience a reduction in benefits. This is not true for the individual market as many benefit options simply do not exist whereas in a group plan any design structure is possible. Insurance carriers are much better positioned to price the risk of the group as compared with the individual market. This results in greater competition and lower renewals for retirees.
A specialist Third Party Administrator can be hired to work with the carrier to facilitate all the billing, customer service and claims processing duties, completely removing any day-to-day responsibility from the former employer. In fact, the only involvement that the company will have going forward will be as the sponsor of the group. No financial obligation is required.
Benefits professionals struggling with the tradeoffs of keeping the promise of retiree health benefits and cutting costs should be aware that there are alternatives that accomplish both goals without exposing retirees to the dangers of the individual market. In summary, a properly structured Medicare supplement plan combined with a third party administrator and managed by a specialized advisor with knowledge of the retiree market place can reduce or eliminate a corporation’s obligations while protecting retirees’ interests.