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Employers look to public exchanges for pre-Medicare retiree benefits


Amid continuing cost increases, a sizeable majority of employers offering health care coverage to pre-Medicare-eligible retirees expect to change those plans, according to a survey released Tuesday.

The Willis Towers Watson P.L.C. survey of 467 employers found that 72% of employers plan to make moderate to significant changes in their pre-65 retiree health programs over the next four years.

Just over half — 56% — of surveyed employers are optimistic that the public health insurance exchanges authorized by the 2010 health care reform law and which began operating in 2014 will be an alternative to coverage they now offer their pre-Medicare-eligible retirees by 2018.

An advantage to that approach: Lower-income pre-Medicare eligible retirees — those with incomes between 100% and 400% of the federal poverty level — are eligible for federal premium subsidies for plans purchased in the public exchanges. For example, subsidies are available in 2016 for a family of four collectively earning up to $97,000.

The public exchanges are not available to Medicare-eligible retirees.

With Medicare not available to younger retirees, “Employers are looking elsewhere for a solution,” John Barkett, Willis Towers Watson’s senior director of policy affairs in Washington, said in a statement.

That employer interest in moving pre-Medicare eligible retirees to public exchanges is being fueled by health plan cost increases. For example, employers offering coverage to pre-age 65 retirees expect that without plan changes, cost increases will average 5.7% in 2016, according to the Willis Towers Watson survey. Employers making plan changes expect costs to increase an average of 4.1%.

Those expected cost increases are substantially higher than for those offering coverage to older retirees — those at least age 65 — who are eligible to receive the bulk of their coverage through the federal Medicare program. Employers making plan changes for those retirees expect costs in 2016 to increase an average of 2.7%, or 3.3% for those not making changes.

The Willis Towers Watson 2016 Emerging Trends in Health Care Survey was taken in January and February of this year.

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