Pre-65 Retiree Market Check: Public, Off-Exchange Coverage 

A growing number of employers are moving Medicare-eligible retirees to special retiree medical exchange platforms. Mercer’s National Survey of Employer-Sponsored Health Plans found that 27% of retiree plan sponsors are using an exchange to provide coverage to Medicare-eligible retirees in 2016, up sharply from just 15% two years ago. The programs are attractive because they offer a wider range of choices for retirees and also take on benefit administration.

Now, the combination of the public exchange and expansion of the individual market off-exchange has opened up opportunities for pre-Medicare-eligible retirees as well. The individual marketplace for pre-65 retirees is evolving. Characteristics typically associated with the Medicare marketplace -- rate stability, standardized plans, carrier availability and longevity -- appear to be more challenging in the pre-65 market. 

Recently, several insurance companies have announced their plans to exit the public exchange in certain markets, raising questions with employers about the availability of exchange coverage and off-exchange coverage for pre-65 retirees. Michelle Andrews recently addressed this question in Kaiser Health News. While some states, like the District of Columbia, require the insurance company to offer coverage on the public exchange in order to offer coverage off-exchange, that is not true in every state. But while carrier participation in the pre-65 market has fluctuated, with some national carriers leaving the market or scaling back on their higher value plans, the total number of carriers has remained relatively balanced, as new entrants and smaller, regional carriers gain market presence.

Typically, employers considering a move to a pre-65 retiree exchange are seeking reductions in cost, risk, and administrative burden for this population. Or, based on a geographic footprint analysis, they have found that their pre-65 retirees will likely see savings and choice in the individual market. Often both are the case. It’s important to keep in mind that pre-65 individual coverage options may offer advantages over traditional group insurance in terms of participant personalization of choice and employer administration relief. Issues arising in a handful of markets around the country shouldn’t necessarily mean putting the brakes on a strategy to move retirees out of group plans when there may be a better alternative for them and the organization.

Given that this is an election year and the political landscape surrounding health care reform has been heating up, we can expect little change or significant change in the Affordable Care Act regulations depending on which party gains control of the Senate, House of Representatives, and the White House. For now, the public exchanges are in flux and could create challenges in the pre-65 retiree demographic. For employers looking for alternatives to a traditional group plan for pre-65 retirees, it’s important to do your homework.