Health insurance marketplace could land early retirees

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The crashed website and busy phone lines experienced last week during the launch of health insurance marketplace enrollment would seem to indicate the new program created under the Affordable Care Act is a hit, or at least a curiosity.

But while thousands may be eager to enroll or learn about the exchanges, another group could get pushed into the marketplace whether they like it or not -- retirees who are younger than 65 and therefore ineligible for Medicare.

Moving retirees to something like the marketplace or a defined benefit plan where employers can predict their future costs "has been on the radar for our members for a couple of years," said M. Christine Whipple, executive director of the Pittsburgh Business Group on Health, an association of some of the area's largest employers.

The reason is simple: Retirees younger than 65 make for expensive health insurance beneficiaries.

"They are probably 75 to 150 percent more expensive than an active employee," said Lorin Lacy, principal for the health and productivity group at Buck Consultants, Downtown.

"Clearly, as we see more global competition for employers in the U.S., other countries' employers don't feel that obligation of having health care costs for people who are no longer production people," he added. So, now every American employer "is looking for ways to minimize that or get out of it completely."

As health care costs have risen, the percentage of employers offering health insurance for early retirees has steadily declined in the past decade, dipping to 24 percent in 2012, according to the consulting firm Mercer.

Paul Fronstin of the Employee Benefit Research Institute in Washington, D.C., says there were 5.3 million retirees ages 55-64 in 2012 and an additional 4.7 million who were not working because they were ill or disabled.

The trend away from offering early retiree health insurance undoubtedly will make the health insurance marketplace an appealing option for employers "without feeling like they have betrayed their former workers," Mr. Lacy said.

Ray Landis, the Harrisburg-based advocacy manager for AARP in Pennsylvania, said he, too, believes "we are going to see employers push pre-Medicare retirees into the exchange" because employers were already looking for options to the increasingly expensive health coverage.

"The question is, will the employer still provide some kind of premium assistance for the retiree?"

Mr. Lacy said the marketplace might not be a bad option because staying with the company plan can be expensive for the retirees -- through premiums, deductibles and co-payments -- as well as the employer. In the marketplace, they are more likely to find flexibility, in both price and coverage, for their individual medical needs and budget, he noted.

"You may be able to do as well or better on the exchanges. Time will tell if that's really the case."

Also, Mr. Landis, whose organization includes 1.8 million AARP members in Pennsylvania alone, said the health insurance marketplace addresses a scenario being seen more and more often: A husband retires at 65 and moves from a company plan to Medicare. His wife, who is 63, "is sort of stuck without insurance until she becomes Medicare eligible. In that situation, the exchange is a really good place for her to land because otherwise she would be left out in the cold."

Still, cutting that tether to the company plan can be unsettling. And it can be a challenge to sort through the different plans to make sure a patient's long-term physician is part of the new network.

"The ideal would be if your former employer still kept you in a retirement plan, but the exchanges are better than getting thrown out without any insurance at all," Mr. Landis said. "And, even better than being a safety net, it's an affordable safety net."

People are not accustomed to shopping for their own health care. Early retirees "really do need something like a health advocate," Mr. Lacy said, to help them sort through the various plans and decide which one is best for them.

The good news for early retirees, he added, is that finding good health coverage is a short-term problem.

For most, it's only a few more years before they will be eligible for Medicare.

nation - businessnews - health

Steve Twedt: or 412-263-1963. First Published October 7, 2013 8:00 PM


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