A weak economy and uncertainty about the impact of national health care reform have left U.S. employers who provide their retirees with health benefits confused over how to address the rising cost and continuing administrative burden of their plans, according to a new survey from the not-for-profit International Society of Certified Employee Benefits Specialists (ISCEBS) and consultancy Towers Perrin.
The survey report, Retiree Medical Challenges and Opportunities, reveals a sense of urgency about the need to make changes to costly retiree medical plans. “Employers have a good understanding of their retiree medical problems and a wish list about the general features of an attractive solution. Specifically, they want retirees to have access to high‐quality commercial insurance products and they want an outsourcing partner to handle administration,” says C. Scott Boring, ISCEBS president and vice president of Lockton Insurance Brokers LLC.
Plan sponsors remain concerned about retiree disruption and are looking for clarity about the right way to recast their “deal” with employees and retirees to achieve broader workforce management objectives, Boring says.
The joint ISCEBS-Towers Perrin survey, now in its fifth year, was conducted in mid-2009 and drew responses from 155 U.S. companies and nonprofit organizations. Among the key findings:
• Nearly 70 percent of survey respondents indicated that they continue to provide retiree medical coverage to at least some retirees.
• About 80 percent of retiree medical plan sponsors pay some portion of the cost of plan coverage.
• Extending future retiree medical coverage to new hires—a concept conventionally thought to be a thing of the past—is still a reality for 40 percent of the survey’s respondents.
A major concern for employers: pre‐65 retirees, who are exposed to high and rapidly rising premium cost-sharing (45 percent of respondents providing retiree benefits subsidize pre‐65 coverage but limit their subsidy to a fixed-dollar maximum, or cap). Employers have more alternatives for post‐65 retirees, whose employer coverage is secondary to Medicare.
Yet despite increasing costs and administrative challenges, only 11 percent of survey respondents reported weaning off plan sponsorship and converting to a premium reimbursement model linked to private commercial insurance offerings. While the precise reasons for this apparent inertia are unclear, there is evidence that survey respondents seek a broader, more comprehensive marketplace-based solution that supplements private insurance with outsourced administration.
Overall, "employers understand the role of retiree medical as a component of total rewards, and the ways in which thoughtful, strategic planning can balance appeal for employees and retirees with affordability for employers," Boring says.
Another View on Retiree Health Benefits
According to the Society for Human Resource Management's (SHRM) 2009 Employee Benefits survey report, 26 percent of SHRM members say their organizations provide retiree health care coverage (down from 35 percent in 2007), while 2 percent offer this benefit but have plans to reduce or eliminate it within the next 12 months. Zero percent indicated they had plans to begin offering retiree health coverage.
By organizational type, among SHRM members, retiree health coverage was offered by 14 percent of privately owned companies, 28 percent of publicly owned companies, 30 percent of nonprofit organizations and 64 percent of government sector respondents.
Stephen Miller is an online editor/manager for SHRM.
Health Reform: Mixed Impact on Retiree Benefits, Study Finds, SHRM Online Benefits Discipline, December 2009
Employers, Unions Warn Against Taxing Medicare Drug Subsidy in Retiree Health Programs, SHRM Online Benefits Discipline, December 2009
SHRM Online Benefits Discipline