Towers Watson unveils retiree health care risk transfer program
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An innovative risk transfer program unveiled Monday by Towers Watson & Co. will allow employers to end health care coverage for Medicare-eligible retirees but assure continuation of the funding of coverage for the retirees through the purchase of a group annuity from participating insurers.
Mitchell Cole, Stamford, Conn.-based managing director of Towers Watson Retiree Insurance Solutions, describes the approach as a “first-ever” retiree medical exit solution that creates value for both employers and retirees.
Under the approach, which Towers Watson calls “Longitude Solution,” employers would transfer their retiree health care obligations, such as their promise to pay a certain amount of the premium in plans selected by retirees, through the purchase of a group annuity from a list of top-rated life insurers.
“The benefits do not engage or attract new talent, yet they create balance sheet volatility and income statement expense and divert management time,” Mr. Cole said in a statement.
Through the annuity purchase, which would be fully and immediately tax-deductible, the employer's retiree health care obligation would end, with employers reaping financial and other advantages.
Retirees who would choose coverage from insurers participating in Towers Watson's private health care exchange — One Exchange — would have the certainty of knowing that funding of their health care coverage would continue, regardless of what happens to their former employers in the future, such as financial difficulties.
Today, “there is a degree of insecurity for retirees. This approach eliminates it. It is sleep insurance for retirees,” Mr. Cole said.
“Transitioning retirees to a private exchange reduces the cost and administrative burden of retiree medical. The exit solution is the end of a journey that our clients begin when a company adopts a private Medicare exchange,” Towers Watson Chairman and CEO John Haley said in a statement.
