Employer and union-sponsored retiree well being plans can play an necessary function in offering supplemental advantages to folks with Medicare, however simply 13 p.c of enormous employers at present supply retiree well being advantages to Medicare-age retirees, based on the KFF Employer Well being Profit Survey. Considerations about prices related to retiree well being advantages have led employers and unions to implement adjustments to restrict their monetary legal responsibility whereas persevering with to supply retiree well being advantages, together with establishing monetary caps on their legal responsibility, shifting towards outlined contribution approaches, growing retirees’ premium contribution, and extra lately, by providing their Medicare-eligible retirees protection via Medicare Benefit plans.
This evaluation makes use of knowledge from the 2022 KFF Employer Well being Advantages Survey to look at the extent to which giant non-public and non-federal public employers that provide retiree well being advantages are turning to Medicare Benefit and why they’re making this shift. Nevertheless, the Survey doesn’t embody details about union-administered advantages. For added details about strategies, see Survey Design and Strategies.
Primarily based on the Survey, we discover:
- Half (50%) of enormous employers providing retiree well being advantages to Medicare-age retirees supply protection to a minimum of some retirees via a contract with a Medicare Benefit plan, practically double the share in 2017 (26%).
- About 44% of enormous employers that provide Medicare Benefit protection to their retirees don’t give retirees a selection in protection choices.
- Amongst bigger employers with 1,000 or extra employees that provide retiree well being advantages via a Medicare Benefit plan, probably the most generally cited purpose they elected this feature was the decrease value.
Background
The share of Medicare beneficiaries provided retiree well being advantages has been eroding over time. For folks with Medicare, employer or union-sponsored retiree well being advantages might help to make Medicare extra inexpensive, by serving to to cowl deductibles and price sharing and by offering supplemental advantages that aren’t coated by conventional Medicare. Till pretty lately, employer and union-sponsored retiree well being protection was sometimes designed to coordinate or wrap round conventional Medicare. Extra lately, employers with retiree well being obligations have turned to Medicare Benefit, an method that would have implications for retirees’ core Medicare advantages, significantly if the one choice for retirees is a Medicare Benefit plan, which can impose restrictions, reminiscent of extra restricted supplier networks and prior authorization necessities.
Medicare Benefit plans, that are primarily HMOs and PPOs, present all Medicare-covered advantages, typically for no further premium for plans open for normal enrollment (aside from the Half B premium), sometimes embody Half D drug protection, and will cowl different advantages reminiscent of imaginative and prescient, dental, and listening to advantages. In 2022, over 5 million Medicare beneficiaries obtain their Medicare-covered advantages and supplemental retiree well being advantages via an Employer Group Waiver Plan (EGWP). Whereas group enrollment has accounted for roughly the identical share of complete Medicare Benefit enrollment since 2010 (18%), the precise variety of group enrollees has elevated from 1.8 million in 2010 to over 5 million in 2022 as Medicare Benefit enrollment general has grown.
Underneath this method, employers and unions contract with a Medicare Benefit non-public insurer to offer all Medicare-covered advantages in addition to supplemental advantages. The employer (or union) and/or non-public insurer (appearing on behalf of an employer) receives a fee from the federal authorities (Medicare) and agrees to cowl all Medicare-covered advantages, together with a bundle of supplemental advantages for retirees of their group. Funds are primarily based on the bids of different Medicare Benefit plans accessible to particular person (non-group) enrollees, adjusted for geography and danger. Whereas Medicare pays for retirees in group plans, there may be little or no knowledge on the premiums, value sharing, supplemental advantages, and supplier networks in these plans.
Employer plans are eligible to obtain rebates and bonus funds from Medicare, each of which assist cowl the prices related to supplemental advantages for his or her retirees. Bonus funds are primarily based on a plan’s high quality score, utilizing a system of stars. Bonus funds for group Medicare Benefit plans reached $2 billion in 2022. On common, bonuses for group plans ($396 per enrollee in 2022) are increased than for Medicare Benefit plans open for normal enrollment ($358).
MedPAC estimates that Medicare Benefit funds to employer plans will common 102 p.c of FFS spending in 2022, which contributes to increased Medicare spending that finally impacts the solvency of the Medicare Belief Fund and better Medicare premiums paid by all beneficiaries. In different phrases, Medicare spends extra per retiree in group Medicare Benefit plans, on common, than it pays for comparable folks in conventional Medicare.
Findings
Amongst all giant corporations (corporations with 200 or extra employees) that provide retiree well being advantages to Medicare-age retirees, 50% present these advantages via a Medicare Benefit plan in 2022, nearly double the share in 2017 (26%) (Determine 1).
Amongst corporations with 5,000 or extra employees providing retiree advantages, 60% supply retiree well being advantages via a Medicare Benefit plan in 2022, a share that has doubled over the identical time interval (29%).
Amongst giant corporations (200 or extra employees) providing retiree advantages via a contract with a Medicare Benefit plan, greater than 4 in 10 (44%) present a minimum of some retirees no selection however to obtain their retiree well being advantages via a Medicare Benefit plan (Determine 2).
Retirees in corporations that provide Medicare Benefit completely are unable to decide on conventional Medicare for his or her core Medicare advantages, relatively than a Medicare Benefit plan, until they’re keen to surrender their retiree well being advantages.
Amongst corporations with 1,000 or extra employees providing retiree advantages via a contract with a Medicare Benefit plan, the first purpose the agency elected this feature is the decrease value (Determine 3).
Amongst employers with 1,000 or extra employees that provide retiree advantages via a Medicare Benefit plan, about 4 in ten employers (42%) stated the first purpose they chose this feature was as a result of decrease value. Practically 1 / 4 (23%) stated they don’t know, whereas fourteen p.c stated it offers flexibility for enrollees, eight p.c stated it has higher protection choices, seven p.c stated it’s administratively easier, and 5 p.c chosen it for an additional purpose.
Greater than 4 in ten giant employers (200 or extra employees) providing retiree advantages via Medicare Benefit (41%) stated they don’t know why they chose Medicare Benefit for his or her retiree advantages. That is primarily as a consequence of smaller corporations (these with 200-999 employees) who disproportionately don’t know why their corporations present their retiree well being advantages via a Medicare Benefit plan (49%) in comparison with these with 1,000 or extra employees (23%).
Dialogue
Because the share of enormous employers providing retiree well being advantages to Medicare-eligible retirees continues to say no, corporations that also supply these advantages are more and more turning to Medicare Benefit, typically to decrease their very own monetary legal responsibility, which raises questions in regards to the implications for retirees, employers and the Medicare program.
For some giant employers, the shift to Medicare Benefit seems to be a technique to keep up advantages for his or her retirees, with out terminating protection or adopting different adjustments that extra straight shift prices onto retirees. Nevertheless, the shift to Medicare Benefit has implications for retirees that reach past supplemental advantages. This method has the potential to limit retirees’ entry to docs and hospitals, relying on the plan’s supplier community, and topic retirees to value administration instruments, reminiscent of prior authorization, which will restrict entry to Medicare-covered providers. Restricted supplier networks was a significant space of concern when New York Metropolis lately tried to maneuver its metropolis employee retirees right into a Medicare Benefit plan to save lots of an estimated $600 million per 12 months in well being care prices (and will clarify why the implementation of this plan is on maintain as a consequence of litigation and the withdraw of the insurer who was set to run the plan). If retirees are dissatisfied with their community, their solely choice could also be to surrender retiree advantages altogether, though they might retain Medicare, and have the choice to decide on conventional Medicare (probably with a Medigap complement) or a Medicare Benefit plan (together with zero-premium plans).
The rising variety of Medicare-eligible retirees into Medicare Benefit plans raises questions in regards to the influence on Medicare spending, significantly as a result of Medicare pays extra for enrollees in Medicare Benefit plans (together with in group plans) than for conventional Medicare, on common. Additional, the rising variety of Medicare Benefit enrollees in group plans highlights the shortage of transparency about these plans, together with details about which employers are providing Medicare Benefit, and makes it tough to evaluate the extent to which Medicare overpayments could also be offsetting employers’ legal responsibility for retiree well being protection, the scope of protection beneath group plans, reminiscent of supplier networks for Medicare-covered and different advantages, the scope of additional advantages, and premium and cost-sharing necessities.
This work was supported partially by Arnold Ventures. KFF maintains full editorial management over all of its coverage evaluation, polling, and journalism actions.