As More Employers Drop Coverage, Retirees Turn To Specialized Insurance Exchanges

Kaiser Health News reports that in the past 20 years, the number of companies that provide retiree health coverage has dropped dramatically, leaving seniors with the difficult task of choosing among a variety of plans to supplement their Medicare benefits. It is a choice that can be confusing and has large financial implications.

But a move by some employers is softening the blow. They are contracting with companies that operate insurance marketplaces, called exchanges, where Medicare-eligible retirees can enroll in plans to replace what they used to get from the employer. Working with a counselor, retirees can figure out what coverage best meets their needs - determining, for example, whether to buy Medigap and prescription drug plans or to join a Medicare Advantage plan. (Counselors typically rely on salary but sometimes other sales incentives may factor in their compensation.)

In 1993, 40 percent of employers with 500 or more workers offered medical insurance to their Medicare-eligible retirees, according to human resources consultant Mercer's annual survey of employer health benefits. By 2011, that figure had fallen to 16 percent.

The exchanges can benefit both employers and retirees, experts say. Employers' costs are capped and predictable, with fewer administrative hassles, says Bruce Richards, chief actuary and quality leader for Mercer's health-care business. Meanwhile, because retirees can pick among different plans and rates, "usually most people are better off," he says.

Several exchanges have emerged in recent years. They may work with both employer clients and individual insurance buyers. Some offer a range of products from different insurers, while others offer only one insurer's plans. As more employers start re-thinking their overall health benefits approach and potentially offering their active workers defined contributions to buy their own insurance on an exchange, insurance coverage could become entirely seamless between active employment and retirement, thereby reducing the potential for gaps in care that may increase health care costs in the long term.