Companies Look to Transition Retirees to Health Exchanges

LINCOLNSHIRE, Ill., May 20, 2015 /PRNewswire/ -- Challenges and opportunities created by the Affordable Care Act are prompting two-thirds of companies to consider altering their pre-65 retiree health strategies over the next few years, according to a new Aon Hewitt survey. Of those, 35 percent are favoring sourcing health coverage through the public exchanges under a defined contribution approach. Twenty-eight percent are considering eliminating pre-65 retiree coverage and subsidies altogether.

Aon Hewitt's 2015 Retiree Health Care survey of 349 companies covering 3.2 million retirees found that few companies have already taken action with respect to their pre-65 strategies. Just six percent of companies have already decided to move some portion of their pre-65 retirees to the public exchanges to secure health coverage, and another nine percent are offering retirees a choice between the group program and the public exchanges.    

"Most companies are looking closely at altering their pre-65 retiree strategies to reduce cost and relieve the looming excise tax risk facing employers and retirees, but they are waiting on the outcome of the King v. Burwell U.S. Supreme Court case before taking action," said John Grosso, actuary and leader of the Aon Hewitt Retiree Task Force. "Health exchanges are attractive because they enable companies to take advantage of the health care efficiencies found in the individual market, and when you have efficiency on top of competition, you will see better financial outcomes for both companies and retirees."

Mitigating the Excise Tax
According to Aon Hewitt's survey, 84 percent of companies say they plan to make changes to their pre-65 retiree strategies to mitigate the excise tax on high cost employer health plans when it goes into effect in 2018. Of those, 23 percent favor sourcing coverage through the exchanges under a defined contribution approach. Other strategies being considered include:

• Reducing costs by managing copays, deductibles or utilizing a Health Savings Account (HSA)/High-Deductible Health Plan (HDHP) strategy (32 percent)
• Changing retiree premium cost sharing requirements (19 percent)
• Eliminating pre-65 coverage altogether (8 percent)

Changes to Post-65 Retiree Strategies Continue to Gain Steam
According to Aon Hewitt, the actions employers intend to take with their pre-65 strategies are likely to follow the trends already occurring in the post-65 retiree space. Fifty-eight percent of companies are currently reassessing their long-term post-65 retiree health strategies. Of those companies that have already decided to make strategy changes, more than 33 percent have moved forward with one that will direct post-65 retirees to an exchange to secure individual market for coverage, oftentimes accompanied by a defined contribution subsidy. Of the companies expecting to make changes to their post-65 retiree strategies in the future, an additional 33 percent indicate strong interest in this approach.

"Companies that transition post-65 retirees to a private retiree health exchange are generally providing subsidies that allow the vast majority of retirees to buy at least comparable coverage to their group plan, with many retirees finding greater value in the individual market," said Cary Grace, CEO of Aon Exchange Solutions. "This benefit, coupled with the high-touch customer service model and data-driven tools offered by the Aon Retiree Health Exchange, helps retirees find a plan that best meets their needs."

For more information, please visit http://exchangesolutions.aon.com.

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Media Contact:
Amy Kaleniecki, 847-771-4225, amy.kaleniecki@aonhewitt.com
Maurissa Kanter, 847-442-0952, maurissa.kanter@aonhewitt.com

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SOURCE Aon plc