Retiree Medical Coverage: Are You Getting the Best Value?

Why retiree medical?

By continuing to offer retiree medical benefits, organizations can reap important benefits:

• Avoid the costs of retirement delays: One study showed that employers pay an additional $10,000 to $50,000 in costs for every year an employee delays retirement because they can’t afford it.
• Dramatically reduce the medical costs for Medicare-eligible employees through timely retirement
• Improve retention of future stars by encouraging talent succession
• Improve retirement readiness and awareness
• Offer more robust key employee compensation packages

Balancing benefits, costs and risk

While the advantages of a well-designed retiree medical program are clear for most participants, employers need to balance this benefit with the costs and risks of the coverage. Best practices suggest that employers ask themselves the following questions:

• Have we looked into the savings offered from the private Medicare exchange market and/or Medicare Advantage programs?
• Are we maximizing the Rx government subsidies for our Medicare retiree population?
• How long has it been since the program was updated to reflect retiree population health trends?
• Is the program compliant with appropriate legal obligations, such as HIPAA privacy and security standards?

Optimizing your retiree medical offering

You can optimize your retiree medical offering by looking at the 3 Rs of cost containment:

1. Redefining eligibility requirements: Tie eligibility to service levels, consider institutional goals for workforce planning and review spouse coverage rules
2. Restructuring benefits: Create tier for new hires, reduce benefits for future retirees and eliminate Rx benefits for Medicare-eligible participants
3. Rethinking cost sharing: Move to a flat dollar employer share, fund while employees are active via defined contribution plans, and leverage Medicare private exchanges