Health insurance marketplace could land early retirees

Retirees who are younger than 65, and thus not yet eligible for Medicare, could get pushed into the new health care marketplace whether they like it or not.

Moving retirees to something like the marketplace or a defined benefit plan where employers can predict their future costs "has been on the radar for our members for a couple of years," said M. Christine Whipple, executive director of the Pittsburgh Business Group on Health, an association of some of the area's largest employers.

The reason is simple: Retirees younger than 65 make for expensive health insurance beneficiaries.

"They are probably 75 to 150 percent more expensive than an active employee," said Lorin Lacy, principal for the health and productivity group at Buck Consultants in Pittsburgh.

"Clearly, as we see more global competition for employers in the U.S., other countries' employers don't feel that obligation of having health care costs for people who are no longer production people," he added. So, now every American employer "is looking for ways to minimize that or get out of it completely."

As health care costs have risen, the percentage of employers offering health insurance for early retirees has steadily declined in the past decade, dipping to 24 percent in 2012, according to the consulting firm Mercer.

Paul Fronstin of the Employee Benefit Research Institute in Washington, D.C., says there were 5.3 million retirees ages 55 to 64 in 2012 and an additional 4.7 million who were not working because they were ill or disabled.

The trend away from offering early retiree health insurance undoubtedly will make the health insurance marketplace an appealing option for employers "without feeling like they have betrayed their former workers," Lacy said.

Ray Landis, the Harrisburg-based advocacy manager for AARP in Pennsylvania, said he, too, believes "we are going to see employers push pre-Medicare retirees into the exchange" because employers were already looking for options to the increasingly expensive health coverage.

"The question is, will the employer still provide some kind of premium assistance for the retiree?"

Lacy said the marketplace might not be a bad option because staying with the company plan can be expensive for the retirees -- through premiums, deductibles and co-payments -- as well as the employer. In the marketplace, they are more likely to find flexibility, in both price and coverage, for their individual medical needs and budget, he noted.

Still, cutting that tether to the company plan can be unsettling. And it can be a challenge to sort through the different plans to make sure a patient's long-term physician is part of the new network.

"The ideal would be if your former employer still kept you in a retirement plan, but the exchanges are better than getting thrown out without any insurance at all," Landis said. "And, even better than being a safety net, it's an affordable safety net."

The good news for early retirees, he added, is that finding good health coverage is a short-term problem. For most, it's only a few more years before they will be eligible for Medicare.

Contact Pittsburgh Post-Gazette reporter Steve Twedt at Distributed by Scripps Howard News Service,

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