WASHINGTON (July 25, 2016) — For years, employers, increasingly unable to afford the coverage, have stopped providing healthcare plans to their retired workers.
A Kaiser Family Foundation report issued recently noted that in 2015 just 23 percent of employers with at least 200 employees offered retiree healthcare coverage. That is down from 32 percent a decade earlier and a dramatic decline compared with the two-thirds of employers who provided the coverage in 1988.
Other surveys, looking just at employers' coverage for Medicare-eligible retirees, also have found sharp declines.
For example, in 2014, just 16 percent of employers still offered coverage to Medicare-eligible retirees, a drop from 24 percent in 2005, according to a survey by a unit of the National Center for Health Statistics.
“Employer-sponsored retiree health coverage once played a key role in supplementing Medicare. Any way you slice it, this coverage is eroding,” Kaiser said in its report.
But those statistics, said John Barkett, director of health policy affairs at Willis Towers Watson P.L.C. in Washington, D.C., don't tell the full story.
While the employer move away from providing retiree healthcare coverage has been “well-documented,” another trend has not, according to Mr. Barkett.
That trend: the move of employers to make available to retirees coverage through private exchanges, with employers offsetting part of the cost of coverage through contributions to health reimbursement arrangements, which retirees can apply toward the premiums in the exchange plan they select.
Indeed, a forthcoming Willis Towers Watson survey of several hundred employers found that one-third of respondents already have taken this approach for coverage for Medicare-eligible retirees, and two-thirds are considering doing so by 2018, Willis Towers Watson said.
The appeal of such an approach is simple. “It allows employers to make coverage available with predictable costs and in an affordable way,” Mr. Barkett said.
Several major employers, including Kraft Heinz Co. and the Ohio Public Employees Retirement System, in the last year have adopted the approach.
This report appeared on the website of Business Insurance magazine, a Chicago-based sister publication of Tire Business.