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TRENDING: EMPLOYERS CUTTING RETIREE HEALTH CARE COVERAGE

By: Nicola Heredia, CHS Marketing Coordinator

Operating a business efficiently requires upper management to analyze all company expenses to determine where cutbacks need to be made to sustain a profitable business. Most recently, the rising cost of health care has required companies to review benefits offered to employees to determine where funds can be saved.

Although majority of companies will offer the current employees medical coverage, there are some employers that offer plans that carry over to retirement. The primary purpose of these plans are to either provide coverage to retirees who are under 65 or to those are over 65, qualify for Medicare coverage and still need supplemental insurance.

“Employer-sponsored retiree health coverage once played a key role in supplementing Medicare,” said Kaiser Family Foundation in a report. “Any way you slice it, this coverage is eroding.”

A new study released by the Kaiser Family Foundation reports that the number of companies offering retiree health plans is rapidly declining. In 1988, 66 percent of businesses surveyed offered these benefits; however, only 23 percent are still providing retiree coverage in 2015.

So what companies are still offering these packages to retired employees? According to the survey, 42 percent of employers with 5,000 or more staff members continue to provide health coverage to retired individuals.

“Companies want to maintain their promise to support the health and financial security of their Medicare-eligible retirees,” said Aon’s Retiree Exchange Leader Jane Funk in a Forbes’ article. “But they are looking for solutions that allow them to do so in a way that maximizes value for these retirees while managing costs.”

Eliminating retirement benefits is certainly attributed to being a sign of the times. The increase in overall medical costs have forced employers to look at ways to reduce expenses.

According to a Business Insurance article, there are two trends in how companies are handling these added costs. Some have decided to completely revoke this benefit and eliminate the expense of retirees’ health care all together, while others have offered coverage in different ways.

Instead of paying for majority of the health care benefit, some employers have turned their retired staff members to the private exchanges, offering to pay a portion of their premium.

“The drop in retiree health coverage has important implications for retiring boomers who are approaching their Medicare years with a different set of insurance needs and choices than their parents’ generation,” reported the Kaiser Family Foundation analysts.

This option makes it possible for retired individuals to enroll in a coverage plan that fits their needs with the financial help of their company. On the flip side, employers are no longer opening themselves up to hefty medical costs. Instead, they will pay out a set amount to an individual employee to lighten the burden on them without putting financial strain on themselves as a business.

“It allows employers to make coverage available with predictable costs and in an affordable way,” said John Bartlett, director of health policy affairs at Willis Towers Watson P.L.C, in the Business Insurance article.

While it may not be clear what each individual company is going to do, the important piece is that retired employees must be knowledgeable about their health care retirement packages. If their employer revokes their contribution, retirees have to react accordingly to ensure that their coverage is sufficient for their needs.

MEDICAL INSURANCE DEDUCTIBLES INCREASING MORE THAN INCOME

By: Nicola Heredia, CHS Marketing Coordinator

The cost of having a health insurance plan continues to place more financial burden on the public rather than businesses. As more and more expenses are shifted to the plan participant, out-of-pocket costs, such as deductibles, continue to rise as a way for other entities to save.

A Kaiser Family Foundation released a study demonstrating that over the last five years, the average health care plan deductible has outpaced the growth of individual wages. The survey estimates that since 2010, deductibles have risen more than six times faster than employees’ income have.  

“While it’s absolutely true that we’ve been living in a period of an historic slowdown in health care costs, it’s almost invisible to consumers,” Kaiser Foundation Chief Executive Officer Drew Altman said in an interview. “What they pay for health care is going up at a time when their wages are relatively flat."

The KFF survey, which focused on employee-sponsored plans, estimates that one in five workers have an annual deductible of $2,000 or more. This has increased from a reported average of $900 back in 2010. Experts believe that this trend is due to companies looking for ways to still offer benefits, while sharing the cost with their employees.

"Along with the higher deductible, there are all these plan features that allow employees to make more cost-conscious decisions,” said Beth Umbland, director of research for health and benefits at Mercer, in a Bloomberg article. “The high deductible provides a financial incentive for employees to use other cost-sharing opportunities.”

Sharing costs with employees allows companies to still offer competitive benefits and incentives without completely having to foot the bill. When it comes to increasing deductibles, it is also not a guaranteed expense, like a premium, that needs to be paid annually. Instead, it is estimate of the maximum amount that may have to be accounted for.

Although the Kaiser study focuses on the private insurance sector, similar trends are being reported within the insurance marketplace exchanges. Shifting some financial burden from insurance plans to the participants has been a way to make individuals more accountable for their health and coverage costs.

“Deductibles increasing in the exchanges is expected, as we have observed already that deductibles have been increasing at a vigorous rate in the majority of insurance markets,” Drew Gonshorowski, a senior policy analyst in the Center for Data Analysis at The Heritage Foundation, told The Daily Signal

Freedom Partners, a nonprofit organization focused on expanding opportunity in America, analyzed average Obamacare deductibles state-by-state. According to their results, 17 states had deductibles of $3,000 or more.

“After enduring double-digit premium increases and canceled plans under the Affordable Care Act, surging out-of-pocket costs—specifically deductibles—are making it difficult for Americans across the country to access the health care plans they were mandated to purchase,” reported the Freedom Partners.

The struggle with rising deductibles and other out-of-pocket costs gets more complicated when the nation’s wage average is rising at a slower rate. As employers relieve some of their financial responsibilities, workers are feeling the pressure of increased costs without appropriately increased wages.

The gap between income and out-of-pocket costs may lead Americans to reevaluate how much coverage is needed in order to have satisfactory medical care. Depending on a variety of factors, such as the health of the individual, there may be some difficult decisions to make resulting in reducing the level of coverage in order to save personal expenses.

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