Communications vital when changing retiree medical plan structures

NEW YORK — Employers planning to transition their group retiree medical benefit plans to individually purchased exchange-based models must carefully consider how the change in benefit structures will be communicated to current and future retirees, benefit managers say.

During a panel discussion on Thursday at the 2013 Employee Health Care Conference in New York, benefit managers for Leverkusen, Germany-based Bayer A.G. and Vevey, Switzerland-based Nestle A.S. outlined the processes by which their separate companies exited their employer-sponsored group retiree health plans in favor of coverages purchased through private exchanges.

At both companies, panelists said clear and consistent communication strategies encompassing current and future retirees — as well as senior corporate leadership — were vital to the success of their shifts to the individual markets.

“As we were implementing this, the communication portion was really a key part of the strategy for us,” said Mike Holian, Nestle's Cleveland-based vice president of employee financial shared services. “The senior management was really anxious about disrupting our retiree population.”

Beginning in January, Nestle shifted its U.S.-based Medicare-eligible retirees to an employer group waiver plan, or EGWP, with a wraparound secondary plan for pharmaceutical benefits, while its pre-65 and future retirees were transitioned to individual plans purchased through private exchanges operated by New York-based Towers Watson & Co. and its recently-purchased exchange service provider, San Mateo, Calif.-based Extend Health Inc.

During the planning phases of the change-over, Mr. Holian said his team was instructed to devise a post-employment benefits solution that, above all, would not adversely impact the company's retirees, balancing the affordability and sustainability of the program, as well as capitalizing on efficiencies available in the marketplace and, where possible, using third-party funding to reduce costs for Nestle and its employees.

“There was a fair amount of complexity involved in getting buy-in to all the changes that we were trying to make,” Mr. Holian said. “The primary goal here was really not about savings, but instead about how we could make this plan better for the retirees going forward in a way that was sustainable.”

%%BREAK%%

Similarly, Bayer migrated most of its current and future U.S. retiree population — including most nonunion Medicare retirees — into individual defined-contribution plans purchased through the Extend Health exchange.

The company used savings earned from the termination of its group retiree medical plans and its retiree life insurance program to fund an increase to its 401(k) matching contributions and to establish a retiree medical savings account program for employees hired after Jan. 1, 2005, who are not eligible for the defined contribution for medical benefits.

“When we communicated all of these changes, we centered those communications on the idea of retirement security,” said Lori Lechner, Bayer's Pittsburgh-based director of benefits planning. “I feel strongly that what we did was move an unprotected benefit to a protected benefit. That was an important message for us to communicate to the employees.”

All told, Ms. Lechner said Bayer migrated nearly 7,300 retirees — about 93% of the company’s total U.S. retiree population — and their spouses into its exchange-based plans for the 2013 plan year. More importantly, she said, the company was able to successfully contact and inform 99% of its retiree population about the changes to their medical benefits.

“We had a lot of printed material and hosted at least 27 on-site retiree meetings, and encouraged them to set up a one-on-one appointment with Extend Health’s benefit advisors,” Ms. Lechner said. “We sent out several reminder notices as well, because we really didn’t want any retiree feeling like they were left behind.”

As was the case at Nestle, Ms. Lechner said securing executive-level support for the transition plan was at times challenging but ultimately crucial to its success.

“It was really important to us to make sure that our senior leadership and (human resources) managers understood what we were doing, and understood that they may get questions from employees and retirees or comments that people weren’t happy with the change,” Ms. Lechner said. “A decision like this will always result in noise, but they had to understand that this was something that we felt was the right thing to do.”