introductions and welcome
DESCRIPTION
FORUM ON PRE-65 INSURANCE: AN INITIAL VALUE PROPOSITION Emeriti, Aetna, and PricewaterhouseCoopers April 27, 2007. A benefit program of, by, and for colleges, universities, and higher education-related tax-exempt organizations. - PowerPoint PPT PresentationTRANSCRIPT
FORUM ON PRE-65 INSURANCE: AN
INITIAL VALUE PROPOSITION
Emeriti, Aetna, and PricewaterhouseCoopers
April 27, 2007 A benefit program of, by, and for colleges, universities, and higher education-related tax-exempt organizations.
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INTRODUCTIONS AND WELCOME
PRESENTATION TEAM
Kenneth Cool, President, Emeriti
Linda Cool, Founding Director, Emeriti
Michael Thompson, Principal, PricewaterhouseCoopers
Michael Fusaro, Vice President, Aetna
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AGENDA
MORNING SESSION – 11:00 am (ET)
Strategic Value of Pre-65 Insurance Ken Cool
Results of Pre-65 Insurance Survey Linda Cool
National Content of the Pre-65 Group Mike Thompson and Individual Markets
Embedded Costs of Pre-65 Coverage Mike Thompson
Pre-65 Insurance Concepts for Emeriti Michael Fusaro
Short Question Period Audience
LUNCHEON BREAK – 12:30 pm (ET)
AFTERNOON FEEDBACK SESSION – 1:30 pm (ET)
Dialogue with Participants Emeriti Team
Closing Remarks Ken Cool
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STRATEGIC LINKAGE OF HEALTH CARE TO RETIREMENT
MOUNTING EVIDENCE
AAUP Survey of Faculty Retirement – 2000
Mellon College Retirement Project – 2000
Emeriti Pre-65 Insurance Survey – 2007
AAUP Survey of Faculty Retirement – 2007
STRATEGIC ISSUES
Coordination with Retirement Incentive Programs
Coverage Gaps and COBRA Limitations until Medicare
Employer Insurance Expense and Unfunded Liabilities
“Early” Retiree Affordability, Access, and Choice
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CONTINUUM OF COMPREHENSIVE SUPPORT
Age 55 Medicare Eligibility End of Life
Savings and Payment Flexibilities
Portable Guaranteed Issue Coverage
Tax-Free Reimbursement of Qualifying Medical Expenses
Integrated Retirement Planning and Education for Participants
Outsourced Administrative Services for Employers
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EMERITI FUNDING FLEXIBILITIES
EMPLOYER OPTIONS
• Pre-funded DC Contributions (into Employer VEBA Trust)
• Special DC Lump Sums (into Grantor Trust)
• Continuing DB Subsidies (on Pay-as-you-go Basis)
PARTICIPANT OPTIONS
• Systematic Payroll Contributions (into Employee VEBA Trust)
• Periodic Lump Sums (into Employee VEBA Trust)
• Monthly Electronic Transfers (Pay-as-you-go Payments)
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EMERITI INSURANCE CHOICES
Suite of coordinated pre-65 and post-65 insurance options
Comprehensive benefits at varying levels of coverage and cost
Guaranteed issue group coverage
(in coordination with plan eligibility criteria)
National access
Annual enrollment choice among plans
Family health security at retirement
(retired participant, spouse/partner, and pre-majority
children)
Access to other health care benefits
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THE PRE-65 RETIREE INSURANCE SURVEY
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THE PRE-65 RETIREE INSURANCE PROJECT
Purpose of the Survey
Explore institutional practices and opinions concerning health insurance for pre-Medicare eligible retirees
Institutions Contacted 42 current institutional members of Emeriti
58 institutions expressing interest in Emeriti
15 institutions with no Emeriti contact
Surveys Returned N= 44 (38%)
26 Emeriti Members
16 Institutions with Emeriti contact
2 Institutions with no Emeriti contact
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INSTITUTIONAL CHARACTERISTICS
Size of Active Institutional Workforce
Small (under 500) 9 (21%) Medium (500-1,500) 24 (55%)
Large (over 1,500) 11 (25%)
Type of Institution
Private 40 (91%) Public 4 (9%)
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HOW IMPORTANT IS OFFERING HEALTH INSURANCE TO THE PRE-MEDICARE RETIREMENT DECISION?
Very Important 36 (84%)
Important (along with pension) 6 (14%)
Of Little Importance 1 ( 2%)
One survey respondent noted that the institution provides a generous pension contribution so that early retirees should have sufficient resources to buy pre-65 individual coverage.
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THE PRE-65 RETIREE HEALTH
CONTEXT TODAY
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DOES YOUR INSTITUTION OFFER A
PRE-65 RETIREE MEDICAL PROGRAM?
Yes, for all employees 14 (32%)
Yes, faculty only 4 ( 9%)
Yes, certain defined groups 8 (18%)
Individual ad hoc arrangements 5 (11%)
No program, access only 11 (25%)
Nothing done for early retirees 2 (5%)
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DOES YOUR INSTITUTION CONTRIBUTE
TO THE RETIREE PREMIUM COST?
Average Cost of Total Premium
Per Month
Average Employer
Contribution Per Month
Yes, for retiree only
7 (19%) $439 $324
Yes, for retiree and dependent(s)
18 (50%) $831
$469
No,
access only 11 (31%) N/A N/A
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PREMIUMS CHARGED FOR
PRE-65 RETIREE INSURANCE
Same premium as actives 29 (76%)
Higher premium than actives 9 (24%)
NOTE: A statistically significant relationship was found between when an institution assigned the same premium to pre-65 retired participants as the blended active employee rate and when the employer chose to pay all or part of the pre-65 retiree’s premium.
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ARE EARLY RETIREES KEPT IN ACTIVE
PLAN UNTIL MEDICARE ELIGIBILITY?
Yes, retiree only 1 (2%)
Yes, retiree and eligible dependent(s)
36 (82%)
No, retirees must find individual insurance
7 (16%)
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PROPOSED PROGRAM CHANGES FOR PRE-65 MEDICAL INSURANCE
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WHAT IS YOUR INSTITUTION’S CURRENT THINKING ABOUT
THE FUTURE OF YOUR PRE-65 RETIREE HEALTH PROGRAMS?
Continue existing program
19 (54%)
Set up a new, very different program
15 (43%)
Eliminate the program 1 ( 3%)
Total 35
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MANAGING EMPLOYER COSTS
Employer contributions to premiums have been capped
13 (52%)
Employer contributions are not capped today
12 (48%)
Total Responses 25
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MANAGING COSTS THROUGH
PROGRAM DESIGN CHANGES
Various grandfathered groups were created 15 (39%)
No grandfathered groups in place today 24 (62%)
Total Responses 39
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MOST FREQUENTLY MENTIONED PROGRAM
CHANGES UNDER CONSIDERATION
Reduce/Eliminate Employer Premium Subsidy
Cap Future Employer Subsidies at Current Level
Find Alternative Employer Funding without FAS/GAS Liabilities
Remove Retirees from Active Employee Insurance Pool
Re-introduce a “Viable” Pre-65 Retiree Health Program
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CONCLUDING COMMENTS FROM RESPONDENTS
Lobby for universal health care before Medicare eligibility
Recognize that continued health care is a major concern of those considering early retirement
Develop a voluntary product (“…that allows individuals to fund and then purchase retiree health coverage and that does not require the employer to assume…significant legal, financial, and administrative obligations…is the ideal solution. Unfortunately we all know that this is not practical at this time...”)
Thank Emeriti for this preliminary exploration
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THE PRE-65 RETIREE MEDICAL DESIGN
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Factors Influencing Retiree Medical Design
• Employers are increasingly unwilling or unable to incur an expense and liability that cannot be sufficiently controlled
• Increasingly, access to healthcare coverage during retirement affects an employee’s decision to leave the workforce or re-enter the workforce
• Employers want to avoid “retiree burden,” financial and administrative
• Current movement toward healthcare consumerism
• “Double-edged sword” – Current active employees are foregoing voluntary 403(b) or 401(k) contributions to pay for increased healthcare coverage costs today, further eroding future ability to pay for retiree coverage
• Emerging active health plan designs (e.g. HSAs, HRAs) with spillover feature for retirement
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RETIREE HEALTH ACCESS*RHA Consensus Objectives
“Pre-65 is the Key”
Fully insured, guaranteed issue catastrophic coverage
Pre- and post-65 retiree access No employer contribution required Integration with Medicare reforms Long-term, sustainable solution for current and future retirees
Comprehensive administrative support
* Sponsored by Health Care Policy Roundtable (HR Policy Association & Pacific Business Group on Health)
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RETIREE HEALTH ACCESS*
Employer Options: Pre-65 and Post-65 Coverage
Retiree Health Access
RHA Direct(Individual)
• Non-ERISA• Individual Policies• Subject to Medical
Underwriting
RHA Group
• Group, ERISA Plan• Guaranteed Issue
RHA Hybrid
• Group, ERISA Planfor Pre-65
• Individual and Group for Post-65
• Guaranteed Issue
• Guaranteed issue and re-entry underwriting to enable phased retirement• Total health advocacy and support geared toward retirees• Suite of retiree health options available nationally • Consortial “risk sharing” among plan sponsors and plan options
* Sponsored by Health Care Policy Roundtable (HR Policy Association & Pacific Business Group on Health)
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Emerging Goals for Retiree Health Benefits
• Controlled expense and liability for sponsored health plan
• Shared responsibility for health and health security
• Joint ability to plan for and “fund” the benefit during active years
• Flexible coverage/access for retirees’ personal situations
• Measurable value of benefit during working lifetime
• Reduced barrier to employees’ retirement decision
• Added security against devastating financial risks and long life
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Next Generation Retiree Health Strategy
Retiree Health Account (RHA)
Active Health Account• Spillover excess into Retiree RHA• Incentives for Consumerism/Wellness
Retiree Health Account• Discretionary, matching, or fixed dollar contributions• Investment direction, interest only, or no interest• Incentives for Consumerism/Wellness
EmployerPre-funded Contributions
Retiree Health Plan(s)
Out of Pocket Expenses
Part B and D Premiums
Long term care
Fund accountwhile working
Subject to eligibility and vesting
requirements
Pay premiums/ medical expenses from other
retirement income
EmployerPay-as-you-go Subsidies
$
$
$
Employee
$
Retiree
GradualDraw Down
AnnuityPayouts
Health & Security PlanningTools
Pre-65 and Post-65
$ $
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EMBEDDED COSTS OF PRE-65 HEALTH COVERAGE
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The Hidden Costs of Pre-65 Health Coverage
• Pre-65 Retiree Healthcare Costs are not always what they seem
– Pre-65 retiree healthcare can cost 1.5-2 times those of a typical active health premium ……. But may be included in a “composite active rate”
– Pre-65 retirees may elect COBRA at the “active rate” ….…. But the institution is indirectly picking up the excess cost
– Pre-65 retiree utilization may be buried in composite retiree rate ….…. But net costs for pre-65 retirees may be 2-3 times those of post-65s eligible for Medicare reimbursement
• FAS 106/GASB 45 require recognition of the true cost of Pre-65
• Implicit Pre-65 subsidies can be extracted and redirected toward true Pre-65 costs
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