Affordable Care Act Accelerates Decline of Retiree Health Benefits

The steady deterioration of health care benefits for retirees is accelerating under health care reform as employers begin sending retired workers to private insurance exchanges for coverage.

The Affordable Care Act “has made retiree coverage more expensive for employers,” said Steve Wojcik, vice president of public policy for the National Business Group on Health in Washington, D.C.  “That’s one of the hidden realities of the ACA.” He said that health care reform “is making profound changes” in the retiree health landscape.

In September, IBM Corp. and Time Warner Inc. announced that they are moving retired workers to a private health insurance exchange, giving them money to buy their own coverage. Starting Jan. 1, 2014, the companies’ Medicare-eligible retirees will purchase health insurance through Extend Health, a private exchange owned by consulting firm Towers Watson & Co. The Utah-based company has signed up about 300 employers, including Caterpillar Inc. and DuPont.

More than 60 percent of employers are re-evaluating their long-term retiree health strategies because of health care reform, according to a recent Aon Hewitt survey of 548 companies.

Health Benefits Data November

And of those firms that have decided to make changes for Medicare-eligible retirees, more than 40 percent will move them to a private insurance exchange. But it doesn’t mean that employers “are throwing retirees to the wolves,” according to the survey, which shows that 66 percent of companies plan to provide expert guidance to retirees shopping for coverage on an exchange.

Aon Hewitt runs two corporate health exchanges, one for active employees and one for Medicare-eligible retirees called Aon Hewitt Navigators, which serves about 50 employers, according to a company spokesman.

“Until now most retirees only had to worry about a couple of health care options,” said John Grosso, head of Aon Hewitt’s retiree health task force. “Now employers are explaining that there are a wide variety of options in a post-reform environment that could be a better fit. There are many more choices in plans, greater competition and federal subsidies to offset costs. Most employers are looking to preserve the value of their benefits. It’s a change, but it doesn’t have to be for the worst.”

Health Benefits Data2  November2013

But communicating these changes to retirees is a challenge.

“Employers going in this direction are embarking on a fairly comprehensive communication strategy,” Grosso said. “They are giving employees far more choice in designs, premiums than are available in a group plan structure. They need to explain the merits of the subsidies and the flexibility to be had in an exchange. There needs to be communication before, during and after enrollment.”

While retiree health benefits for new hires are becoming a thing of the past, longtime retirees are not likely to see any changes to their coverage, Wojcik said.

“That’s the last group of people employers want to make changes for,” he said. “The longer you’ve been retired and the longer you’ve been on the plan, the less likely your former employer will change your coverage. It’s much easier for an employer to eliminate retiree health benefits for new hires. For those close to retirement it’s a little harder, but easier than changing it for retired employees.”

Rita Pyrillis is Workforce’s senior editor. Reprinted from

Affordable Care Act: A Delays and Deadlines Update

Feeling confused about the Affordable Care Act? There’s a good reason for that. The federal agencies charged with implementing the 2010 health care reform law — the U.S. Labor Department, Department of Health and Human Services and the Treasury Department — are still working out the rules.

Here’s a quick look at the delays and impending deadlines affecting employers:


Employer Mandate

Employers with 50 or more full-time workers will have to pay a tax penalty of $2,000 to $3,000 per employee if they

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do not offer health insurance plans to those workers or if those plans do not meet ACA standards.

Status: delayed until 2015.

For more: Internal Revenue Service,

Out-of-Pocket Limits for Consumers

The cap on out-of-pocket costs, set by law at $6,350 for an individual and $12,700 for a family, has been postponed for some insurance plans. The delay allows employers that offer separate plans, such as for doctor and hospital care and another for pharmacy benefits, to keep out-of-pocket limits separate for each.

Drug care plans that do not currently have an out-of-pocket limit will not be required to implement one yet.

Status: delayed until 2015

For more: U.S. Labor Department,


Notification of Marketplace Coverage

Every employer that is subject to the Fair Labor Standards Act is required to notify all employees of the health care options available on health insurance marketplaces or exchanges by Oct. 1. Those exchanges will begin enrolling consumers starting that date.

In practice, this requirement affects the majority of employers; FLSA applies to employers with at least two employees and $500,000 in annual revenue or sales as well as hospitals, nonprofits, schools and government agencies.

New hires starting in October will need to be notified within 14 days. Notices must tell employees whether their employer-sponsored plan meets the minimum value standard and is considered affordable under the definitions of the law and that they might qualify for a premium tax credit if it doesn’t.

Deadline: Oct. 1, 2013.

For more: U.S. Labor Department,

Summary of Benefits Coverage

Employers are required to provide a summary of benefits and coverage in fall open-enrollment materials that informs employees if the coverage offered meets minimum essential coverage and value standards set by the law. Employers that do not have an open-enrollment period must provide the statement 30 days before the beginning of the plan period.

Deadline: Fall open-enrollment period or 30 days before beginning of plan year.

For more: Sibson Consulting Capital Checkup,

Employee Status

Even though the employer mandate has been delayed, employers will need to start collecting information in order to manage the potential penalty they will have to pay in 2015. Employers aiming to minimize their tax exposure will have to choose a 12-month period to measure employee job status. Employees determined to be working full time will need to be offered coverage in 2015 or employers will be liable for the penalty.

In order to meet reporting requirements, measurement may need to begin late this year.

Deadline: fall 2013.

For more: Internal Revenue Service,

Reprinted from

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