Retiree Health Care Benefits Continue to Decline

Employer-based retirement health care insurance benefits continue to decline, according to recent industry reports.

Many retirees have been able to rely on private or state employer-based retirement health benefits for supplemental health care coverage while on Medicare in the past, but this is becoming less common.

Employer-based health-related benefits can provide important coverage for the gaps that exist in Medicare programs. Additional coverage benefits can alleviate the cost-sharing requirements and deductibles associated with Medicare. Caps on the amount that can be spent out-of-pocket, often associated with supplemental coverage, are also often helpful for retirees.

Overall, supplemental retiree health and medical benefits sponsored by a private or municipal employer have helped many retirees cope with high medical costs often incurred in retirement.

The Kaiser Family Foundation recently reported, however, that the number of large private employers-considered employers with 200 or more employees-offering retiree healthcare benefits has dropped from 66 percent in 1988 to 23 percent in 2015.

Companies that do continue to offer retiree health benefits have been making changes aimed at reducing the cost of benefits, including:

  • Instituting caps on the amount of the provider’s financial liability
  • Shifting from defined benefit to defined contribution plans
  • Offering retiree health care benefits through Medicare Advantage plan contracts
  • Creating benefit programs through private health insurance exchanges

State employers have also not been immune to the trend, but the type and level of coverage being offered by most states is significantly different than retirement health care coverage being offered by large companies.

Unlike many private employers, state governments continue to offer some level of retiree health care benefits to help attract and retain talented workers, according to a report titled “State Retiree Health Plan Spending,” published by The Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation in May, 2016.

With the exception of Idaho, all states currently offer newly-hired state employees some level of retirement health care benefits as part of their benefits package, according to the report. Of the states offering retiree medical benefits, 38 have made the commitment to contribute to health care premiums for the coverage being offered. State employers are, however, also making changes to the retirement health care insurance benefits they provide to state workers.

Significant among these changes for the states is at least one driving force-the Governmental Accounting Standards Board (GASB) now requires states to report liabilities for retirement benefits other than pensions in their financial statements. The changes were required from all states by the end of 2008. As a result, the increased financial transparency forced states to review the cost of their other post-employment benefits (OPEB) and address how they plan to pay for them.

Because retirement health care benefits account for the majority of the states’ OPEB obligations, many states have made policy changes to address the upcoming obligations. Factors such as date of hire, date of retirement or vesting eligibility, including minimum age and minimum service year requirements, are now being used by states to vary or limit retirement health care benefits.

Overall, from 2010 to 2013, the states saw their OPEB liabilities decrease by 10 percent from $627 billion after inflation adjustments. While this may sound contradictory, the declines are attributed to a slowdown in the growth of health care costs coupled with benefit modifications aimed at cost reductions.

To look at one state as an example, California’s recent budget revealed that health care benefits for retirees are costing the state more than $2 billion a year for an 80 percent increase over the prior 10 years. Although the situation recently changed, California was previously one of 18 states that had nothing set aside to cover its future retiree health care benefit costs of $80.3 billion.

It should be noted that retiree health care plans are typically funded by plan sponsors on a “pay as you go” basis, meaning that monies to pay current and future health care obligations are taken from current assets and not set aside in advance. This differs significantly from pension plans governed by ERISA, which are subject to funding guidelines.

In response to California’s unfunded OPEB liability, employees and the state are now paying into a fund for future retiree health care benefit costs. The state is also matching $88 million in employee contributions and paying an additional $240 million to prefund future retirement health care benefit costs. The changes are impacting retirees as well as state and private employers.

Overall, employer-based retirement health care benefits, once important for supplementing Medicare for retired seniors, continue to decline.

The Potential Impact of Eroding Employer-Based Health Care Retirement Benefits

Many baby boomers who are currently covered by retiree medical plans and plan to rely on future employer-paid medical benefits, are likely to be disappointed to learn that these benefit plans can be changed or terminated. ERISA-governed benefit plans typically contain a “reservation of rights” provision allowing the plan sponsor to change or terminate all or parts of the plan. Many private and state employers are reducing or terminating retiree health benefits due to the increasing cost of insurance premiums, rising health care costs, and increases in longevity.

Since the early 1990s there have been many cases where unexpected changes to post-employment pension and medical benefits have resulted in lawsuits. Typically, the key issue is the reservation of rights language and/or collective bargaining agreement language for employees who were covered by a union contract which referenced retiree medical benefits.

Beneficiaries who have questions about their retiree medical benefits should speak with their plan sponsor to learn about the specific benefits available to them and have a contingency plan for bridging their medical coverage to Medicare, if they are considering early retirement or want to better understand future benefits.

The Importance of Your Health Care Deductible

Health insurance plans are complicated. This used to be the problem of the Human Resources department. However, today more Americans then ever are sharing the responsibility of making decisions for their employer based health care coverage. Millions more are on their own, purchasing health insurance in the private market. While many decisions are centered on the monthly premium, the level of your health insurance deductible can greatly impact the overall cost of your plan and even your level of care.

What Is A Deductible?

A deductible is the amount of health care that the insured must pay before the health plan provider begins to make payments. The deductible applies only to medical care that has been billed directly through the insurance provider. It does not apply to any medical care paid for outside of the health plan.

Deductibles can vary widely from just a few hundred dollars to over $10,000 a year. Some will vary based on in-network versus out-of-network medical care. The deductible is wiped clear once a year, usually on January 1st.

Growing Influence

Most people have typically received health care coverage through their employer. Under such plans, the worker generally paid very little for actual medical care used. There might be a co-pay for a visit to the doctor and perhaps a small yearly deductible, but for the most part, benefits meant you did not pay much, if at all, for the health care you used.

But that’s often no longer the case. The reality is that health care costs have been on a steady, high growth rate over the past two decades. The cost for an employer to provide health benefits has reached a critically high level, in many cases well over five figures. In response, many employers have pushed some of the costs back on the employee. This is often seen directly in an increased share of the monthly premium paid by the employee, but also an increase in plans with high deductibles, most or all of which will be the responsibility of the employee.

High or Low?

When selecting a health care plan, many people focus on the monthly premium. When it comes to budgeting, many people think in month-to-month terms. Low premium, high deductible plans can look attractive. However, with such plans, the insured will have to spend a lot of money out of pocket, in addition to the premium, in the event that they use medical care. Plans such as these are best paired with a health savings account, so that money can be saved tax-free towards the deductible. Otherwise you may be stuck with a very large medical bill you are unprepared to pay.

Many people are used to low-deductible plans, and often prefer them. Its nice to know your medical care has been largely taken care of in a standard monthly payment. Part of why people have insurance is to have predictable costs. However, the cost of high premium plans has risen dramatically over the years, often beyond what a car payment is and in some cases rivaling a house payment. This has made high premium plans less attractive.

What Is Best For You?

In general, a high deductible plan will have a lower total yearly cost then a high premium plan. This is because many people do not use as much medical care as they think over the course of a year. What they have to pay towards a deductible is often offset by their monthly savings with the lower premium.

If you are someone who uses a lot of health care year in and year out, a high premium plan may be a better solution. High premium plans can also be a good decision for people who have a hard time saving. A high deductible plan can be a major hardship for people who do not have much in savings and who typically do not save a lot of money. A high premium plan is somewhat like a forced savings plan.

The Increasing Surge of Health Care

While sitting back in her blue jeans and wearing a heavy workout sweater at the Legacy Emanuel Hospital’s Emergency room, Angela Jones has her feet prompted up and crossed atop of a small table. When asked about health care issues and how they affect her, Angela explains that there is a portion of people who suffer from not having health care insurance. She makes it clear that some of those who suffer most are young people. Jones, who is a college student, declared her passion for the young because it falls under her own age group.

Says Jones, “The Oregon Health Plan should be open to more people who are under 21 years old. Private insurance shouldn’t be so expensive for young people.”

According to national surveys, the primary reason people are uninsured is the high cost of health insurance coverage. Notwithstanding, nearly one-quarter (23 percent) of the uninsured reported changing their way of life significantly in order to pay medical bills. Economists have discovered that increasing health care costs correlate to drops in health insurance coverage.

Jones believes that some of the greatest challenges that people face across this nation is obtaining affordable health care. “I would open an Oregon Health Plan to a variety of people who don’t have insurance. It is hard to get health insurance.”

Terri Heer, a registered nurse at a local hospital, claims that in order to improve America’s health care system a key ingredient is to “make sure that everyone (has) access.”

This would include cutting out on expenses that are not palpable to so called “health care needs”. Heer says, “First, we spend a lot of money servicing people for illnesses that can be prevented. Some of the money spent can go to other things.”

Over the long haul, should the nations health care system undergo significant changes, the typical patient may not necessarily see the improvements firsthand. “I would love to say there will be a lot of changes. I am not a pessimist, but I don’t think there will be any change,” says Heer. Heer does allude to the fact that if more money were spent for people in the health care arena, she says that there is a possibility that the necessary changes would be more evident.

Whether health care is affordable or not is an issue that affects everyone. According to a recent study last year, health care spending in the United States reached $2.3 trillion, and is projected to reach $3 trillion by 2011. By 2016, it is projected to reach $4.2 trillion. Although it is estimated that nearly 47 million Americans are uninsured, the U.S. spends more on health care than any other nation.

The rising tide of health care stems from several factors that has an affect on us all. First, there is an intensity of services in the U.S. health care system that has undergone a dramatic change when you consider that people are living longer coupled with greater chronic illnesses.

Secondly, prescription drugs and technology have gone through significant changes. The fact that major drugs and technological advancement has been a contributing factor for the increase in health care spending. Some analysts suggest that the improvement of state-of-art technologies and drugs increase health care spending. This increase not only attributes to the high-tech inventions, but also because consumer demand for these products has gone through the roof, so to speak.

Thirdly, there is an aging of the population. Since the baby boomers have reached their middle years, there is a tremendous need to take care of them. This trend will continue as baby boomers will qualify for more Medicare in 2011.

Lastly, there is the factor of administrative costs. Some would argue that the private sector plays a critical role in the rise of health care costs and the economic increase they produce in overhead costs. At the same time, 7 percent of health care expenses are a result of administrative costs. This would include aspects of billing and marketing.

Terra Lincoln is a woman who was found waiting in the Emergency room at the Providence Portland Medical Center. When asked about the rising costs of health care, she said, “If you don’t have medical coverage, it’ll cost you too much money. If I leave the hospital right now and I need to buy two (types) of medicines, I couldn’t afford it.” Lincoln says that she is a member of the OHP, but she believes that there are still issues that need to be addressed.

Terra recognizes that to reduce medical costs, she would have to start by getting regular checkups. “Sometimes people of color wait till they’re in pain before they get a checkup,” she said.

A national survey shows that the primary reason why people cannot afford health care is because of soaring costs of health care coverage. In a recent Wall-Street Journal-NBC survey it is reported that 50% of the American public claims that their highest and most significant economic concern is health care. Consequently, the rising cost of health care is the number one concern for Democratic voters.

Regarding the rising tide of health care, Kristin Venderbush, a native Wisconsin, and another patient in emergency at Providence says, “I worry a lot about what happens to the working poor. They don’t have OHP. If you can’t advocate for yourself, you will not get the health care you need…on every level.”

Harvard University researchers conducted a recent study that discovered that the out-of-pocket medical debt for an average consumer who filed bankruptcy was $12,000. This study noted that 68 percent of those who had filed for bankruptcy carried health insurance. Apparently, these bankruptcy’s were results from medical expenses. It was also noted in this study that every 30 seconds someone files for bankruptcy after they have had some type of serious health problem.

In spite of all the social and economic bureaucracy in the health care arena, some changes were made in Washington on January 28, 2008. In his State of the Union address, President Bush made inquired Congress to eliminate the unfair bias of the tax code against people who do not get their health care from their employer. Millions would then have more options that were not previously available and health care would be more accessible for people who could not afford it.

Consequently, the President believes that the Federal government can make health care more affordable and available for those who need it most. Some sources suggest that the President not only wants health care to be available for people, but also for patients and their private physicians so that they will be free to make choices as well. One of the main purposes for the health care agenda is to insure that consumers will not only have the freedom to make choices, but to also enable those to make decisions that will best meet their health care needs.

Kerry Weems, Acting Administrator of the Centers for Medicare and Medicaid Services, oversees the State Children’s Health Insurance Program, also known as SCHIP. This is a critical program because it pays for the health care of more than six and a half million children who come from homes that cannot afford adequate health insurance. These homes exceed the pay scale for Medicaid programs, therefore are not able to participate.

During SCHIP’s ten year span, states have used the program to assist families with low-income and uninsured children for their sense of well-being in the health care arena. The Bush Administration believes that states should do more of an effort to provide for the neediest children and enable them to get insurance immediately. The SCHIP was originally intended to cover children who had family incomes ranging from $20,650. This amount would typically include a family of four. According to sources, all states throughout the U.S. have SCHIP programs in place and just over six million children are served.

Health Care Reporting Requirements for Business

Smart business owners know the importance of keeping good records. The Affordable Care Act has created one more incentive for employers to keep abreast of sometimes complicated reporting requirements, by requiring them to provide information about company-provided health care to both their employees and the government.

Not all of the law’s employer responsibility provisions have been implemented yet. Nevertheless, it makes good business sense to establish effective systems to meet obligations that are likely to be rolled out soon. Acting early will give business owners more time to iron out any wrinkles before the law comes to bear.

Reporting to Employees

The Affordable Care Act requires most employers to report the cost of any employer-sponsored group health plan on employee Forms W-2. This requirement applies to all employers who provide what the government defines as “applicable coverage,” even if the employers are religious organizations or are not subject to Consolidated Omnibus Budget Reconciliation Act (COBRA) requirements. Small businesses issuing fewer than 250 Forms W-2 total are exempt from the reporting requirement until further guidance is issued.

For businesses subject to the rules, the amount reported in Box 12 of Form W-2 must include both the employer and employee portions of the plan’s cost. Certain forms of coverage must be reported, while other forms are either optional or excluded. For more information, see the IRS’ full chart of reporting requirements. (1)

Affected employers are not required to issue Forms W-2 to workers who would not normally receive one, such as retirees, simply to fulfill the requirement. For terminated employees, employers may use any reasonable method to report partial-year coverage, as long as the method is applied consistently. For employees who voluntarily leave and request Forms W-2 in writing prior to year-end, employers must provide the forms within 30 days of the request, but are not required to report the health benefit amounts.

Proposed Section 6056 regulations from the Internal Revenue Service would mainly affect reporting to the Service, though they would also require employers to notify employees in writing of any employee-related information shared with the IRS. These statements will need to be provided annually by January 31. Note that these regulations are still under discussion, and that there is a chance Form W-2 reporting alone could satisfy the requirement. Nevertheless, employers should pay attention to how the final regulations are worded.

Employers subject to the Fair Labor Standards Act have a responsibility to provide all new employees, both part- and full-time, with a written notice pertaining to the Health Insurance Marketplace. These employers include federal, state and local government agencies; hospitals and institutions engaged primarily in the care of the sick, the aged or the developmentally disabled who live on the premises; preschools, elementary and secondary schools, postsecondary institutions of higher learning and schools for gifted children; and companies or organizations with annual sales of receipts over $500,000.

The Health Insurance Marketplace, often referred to as the exchanges, may provide alternatives that cost less than the employer-provided health care plan, if any. Employers must make clear that employer contributions, if any, may be lost if the new employee chooses to pursue private insurance instead. Employers may satisfy the notice requirement through third-party entities, such as insurers or multiemployer health plans, as long as every new employee receives such a notice regardless of whether he or she plans to enroll in the company health care plan.

Finally, any employer providing a health care option must also furnish employees with a standard Summary of Benefits and Coverage (SBC) form. This form explains what services and care the plan does and does not cover. It also lays out the plan’s cost clearly.

How Freedomland Became A ‘Health Care’ Center

My parents were in their early 40s in 1969, the year we moved to the massive Co-op City housing development in the Bronx. My brother and I were preteens.

When it was completed a few years later, Co-op City had more than 15,000 apartments, most of them in high-rises scattered across 300 formerly swampy acres that had once been the Freedomland amusement park. Within a few years, the community’s schools and shopping centers appeared. Most of Co-op City’s occupants were working-class laborers and civil servants, drawn mostly from elsewhere in the borough. Direct and indirect subsidies made their new apartments affordable.

My brother and I both left for college within a decade. Our parents stayed until 1990, when they retired, departed for the suburbs of central New Jersey and rebuilt their lives around the activities of the local senior citizens’ center. But many of their peers stayed in Co-op City, and quite a few of the kids my brother and I grew up with ended up staying with their parents, or inheriting apartments when their parents died.

For thousands of people like my parents, Co-op City became a “naturally occurring retirement community,” also known as a NORC. The survivors of their generation who have stayed put, now advanced far into old age, have had the benefit of family, friends, familiar neighborhood institutions and a host of social services to sustain them. The phenomenon of this open-air retirement home that came into being quite by accident has been apparent for more than a decade. The New York Times wrote about it as far back as 2002. (1)

In New York, Medicaid pays for a lot of the services these people need. To the extent that Medicaid is a low-income health care program, this is not necessarily surprising. Yet what makes New York’s situation different is that Medicaid often covers even those services that don’t have much to do with health care as most people understand it. In literature about the “Health Homes” initiative, introduced in 2012, the state’s Medicaid administrators described the function of a “care manager,” an individual who coordinates those seeing to an individual’s medical, behavioral health and social service needs. The theory is that by making sure people can live independently in their own homes, Medicaid saves money on hospital costs, ambulance rides, repetitive doctor visits and, most of all, nursing home care.

The same thing is happening in the mental health arena. Several years ago, New York expanded Medicaid coverage to provide housing for individuals with mental illness. In addition to the Health Homes program, New York also offers “supportive” housing that combines subsidized housing with a host of services, including medical, but also legal, career and educational, among others. Keep people off the streets and make sure they take their meds and get regular meals, the theory goes, and you’ll ultimately save money on emergency room and other acute-care costs.

Brenda Rosen, the director of the organization Common Ground, which runs a supportive housing building called The Brook, told NPR, “You know, we as a society are paying for somebody to be on the streets.” (2) And the outgoing New York State commissioner of health published an article in December 2013 arguing that housing and support services are integral to health, so Medicaid should help support the costs.

The state may be on board, but the arguments in favor of these programs haven’t made much headway with the federal government, which normally shares Medicaid expenses with the states. The feds won’t pay for these housing services, on the grounds that housing is not health care. Bruce Vladeck, who formerly administered the federal Medicaid (and Medicare) programs, said, “Medicaid is supposed to be health insurance, and not every problem somebody has is a health care problem.” (2)

That’s true. Not all care that leads to better health is health care. Good nutrition, having the time and place to get a full night’s sleep, and access to clean air and water are all essential for health, but we do not expect health insurance to pay for these things. Providing housing to people who need it is what we used to call social work, and most people don’t view social workers as health care providers.

But it is easier to gain political support for providing health care – with its image of flashing ambulance lights and skilled professionals dressed in white – than for subsidized housing for the aging or the disabled, especially the mentally disabled. So it is easier for Gov. Andrew Cuomo’s administration to organize these services under the label of Medicaid Health Homes. They are not homes at all in any traditional sense. Care managers are typically not doctors or nurses, but they are trained in social services or health care administration. Health Homes is a potentially worthwhile initiative that comes with clever, voter-ready branding.

The approach itself is not nearly as novel as the marketing. We have known for decades that good community support, including safe housing and close supervision for people who need it, is a lot less expensive than parking people in hospitals, nursing homes and other institutions. As New York State Medicaid Director Jason Helgerson pointed out when arguing in favor of Medicaid-funded housing support, Medicaid (and taxpayers) bear the cost of long, expensive hospital and nursing home stays. Giving people support to stay in their own homes is also a lot more humane in many, if not most, cases.

The challenge is to develop and market these programs in ways that sustain public support in the face of their predictable abuse. People misusing a service does not make it bad, but it does make it harder for politicians to defend. Disability insurance is also a good thing, but the Social Security disability program is just a couple of years away from going broke, in large part because of the wave of malingering that accompanied and followed the recent recession. Offer a benefit and people will want to use it, even if they are not genuinely part of the target population.

Well-supported housing with an effective array of social services for people who need them can do a lot of good, and can save society significant money as long as we are not prepared to make people in need survive on their own. NORCs can make excellent places for the elderly to live out their days, and housing for mentally ill and developmentally disabled people can keep them safely off the streets and out of the ERs.

What to Look for in a Home Health Care Provider

Anyone in need of home health care deserves non-medical care or in home medical care that is compassionate whether the patient is a child, adult or elder. Home health care services are provided anywhere except for in nursing homes or a hospital. These services may even be provided at an assisted living facility, a school, apartment or house.

As far as care plans go, there are a wide variety of personal care and nursing services that are not just available, they are tailored for the needs of each individual recipient. Customized care plans and follow up assessments should be provided by a registered nurse.

Nursing Supervision and Case Management

The care that is provided by personal care assistants and home health aides is typically supervised by a registered nurse. One of these registered nurses should be on call at all times in order to assist the caregivers as well as to provide medical training and oversight and to implement the plans of care.

Elder or Adult Care

Are you aware of the fact that 75% of the health care costs in the US are incurred by only 12% of Americans? These people generally have some type of chronic illness. The benefits of this type of individualized home care include much more than just being able to keep someone at home for their illness as opposed to being institutionalized or put in a long term care facility. As far as cost goes, home care visits are roughly only 10% of what a single day in the hospital will cost.

Additionally, home health care has a track record that has been proven when it comes to things such as reducing readmissions to the hospital, expensive visits to the emergency room and in managing chronic illnesses. In addition, there is scientific evidence that has proven that patients are able to heal faster when they are in their own homes. Both morbidity and mortality rates are reduced in patients who take advantage of home health care. In fact, 90% of seniors facing long term care in nursing homes prefer to stay home and get the services of a home health care provider.