If you're retired from a company that provides health insurance benefits, get ready for change over the next few years.
Many employers have shed retiree coverage altogether or cut back benefits in recent years due to skyrocketing health care costs. Just 29 percent of large companies provided coverage in 2009, down from 66 percent in 1988, according to the
Now, the new health care reform law is stirring up more changes that should start showing up in retiree plans between now and 2013.
But the new health care law repeals the tax break -- a move that will provide money to fund reform. That's prompting employers to re-evaluate their options for retiree coverage.
One of those options is to move retirees to Part D, which will become more valuable under health care reform. The big change here is the closing of the notorious doughnut hole -- the coverage gap that starts when a beneficiary's annual out-of-pocket spending hits $2,830, and resumes at the catastrophic level ($4,550 out of pocket).
This year, patients who enter the doughnut hole will get a $250 rebate. In 2011, pharmaceutical companies will provide a discount of 50 percent on brand-name drugs to low- and middle-income beneficiaries who find themselves in the gap. Then, the doughnut hole itself will shrink a bit every year, ultimately disappearing entirely in 2020.
"Employers are looking hard at the alternatives," says
Grosso says some employers will send employees into the individual market for Part D coverage -- perhaps with a cash subsidy. Others, he thinks, will purchase Part D coverage for their retirees through group plans.
Most companies will be making changes in 2013, Grosso says, which will be the first year companies won't be able to reflect the tax break on their books.
Employers also are less likely to offer group
"Companies that had been using
Meanwhile, early retirees who are too young for
Pre-Medicare retirees have had a tough time finding affordable coverage in the individual insurance market. Some employers offer these early retirees access to group plans as a way to tide them over to
The health reform law aims to plug the gap by creating public insurance exchanges that individuals can shop for affordable, quality plans. But the exchanges won't start until 2014.
In the meantime, the
"It may slow the tide of terminations," he says. "But this is a stop-gap until the public exchanges are created -- it's a way to keep employers in the game until then."
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(c) 2010 Mark Miller