How will the Affordable Care Act, which last Thursday was upheld by the U.S. Supreme Court, affect retiree health care plans? The answer to this retirement planning question can shape many decisions for people at or near retirement.
Benfield Group, a health care market research firm, surveyed large employers and determined that almost 80 percent plan to offer retirees who are not yet old enough for Medicare a plan that they pay for themselves. Stephanie Bauman, research director at Benfield, says retirees may have to pay more for these plans than they did before they retired, but generally, the plans will be better and less costly than plans available in the open market or through exchanges.
Some 10 percent of large employers told Benfield they expect to drop health care coverage for retirees not yet old enough for Medicare, but they will provide some kind of supplemental compensation. About 10 percent of employers plan to stop offering health care to early retirees altogether.
Major employers with an obligation to provide insurance to retirees 65 and older -- those eligible for Medicare -- will likely opt for an employee group waiver plan, or EGWP, Benfield found. These plans are usually self funded by the company and integrated with Medicare. The good thing about them from an employer standpoint is that they tend to lower what the employer has to pay in claims while increasing any federal subsidies. Bauman says retirees are unlikely to see much difference in their existing benefits if their former employer chooses this route. "It will seem a lot like what you are already getting," she says.
Some employers may opt to shift retirees older than 65 to a private insurance exchange where they will use a subsidy to shop among several options, but only 7 percent of major employers told Benfield they plan to drop post-65 coverage completely.
Bauman says this is all uncharted territory, and employers and employees alike will be feeling their way as the 2014 implementation deadline approaches. "I think that retirees will want to pay close attention to changes and any opportunities that could result," she says.