Waiting for Employers: Is the Train Finally Leaving the Station?

By James Gutman - May 18, 2012

It has been an article of faith, but now it may finally become an article of fact. Employers that still offer retiree medical benefits — a vanishing but not yet vanished breed — seem at last to be doing what the Medicare health plan industry has been predicting for years. They are, in growing numbers, shifting post-age-65 retirees who have company medical benefits to Medicare Advantage (MA) and stand-alone Prescription Drug Plans (PDPs).

Some of the evidence comes from first-quarter financial reports and earnings calls. Aetna Inc., for instance, said April 26 that of the company’s 44,000 increase in Medicare members in the 2012 first quarter, 75% came from group business. Humana Inc. reported April 30 that it had 385,800 MA members on March 31, up 25% from the 308,600 one year earlier. With figures like this as a backdrop, it did not seem to surprise anyone when employee benefits consulting firm Towers Watson on May 14 agreed to pay $435 million to acquire Extend Health Inc., which runs the largest private Medicare plan exchange.

The reason for the employer sector’s moves now seems to come down to — no surprise — money and convenience. The money stems from a combination of the pure cost of furnishing retiree medical benefits, the impending loss in 2013 for employers that furnish retiree drug benefits of the tax-favored status of the federal Retiree Drug Subsidy and the coming excise tax on insurers, which also applies to self-insured employer plans. The convenience comes from the relative ease of giving retirees a fixed contribution and having them purchase coverage on a private exchange.

With those factors in the forefront, are we now finally in a climate when historically slow-to-decide employers will “push the button” and move retirees to MA plans or PDPs? Or are such factors as inertia, fear of disruption and labor-union contracts going to continue inhibiting these moves? What would happen to this trend if the Supreme Court strikes down the reform law? Would that derail the train before it leaves the station?

http://aishealth.com/blog/medicare-advantage-and-part-d/waiting-employers-train-finally-leaving-station