A new era in health care reform may see more employers turning to Medicare and retiree-health coordinators to help them transition Medicare-eligible retirees from employer-sponsored group plans to the individual market.

Medicare laws have made it easier for employers to reduce, eliminate or alter health benefits to workers who are over age 65 and eligible for Medicare.

By partnering with a coordinator, employers not only hope to reduce their administrative costs tied to dealing with retirees, but ensure that those workers have access to Medicare plans on the individual market that fit their individual needs.

In addition, the coordinator educates retirees about Medicare insurance, thus freeing up the HR/benefits team in dealing with retiree health insurance coverage.

Case in point

In July 2008, H.B. Fuller Co. informed its workers and retirees that it no longer wanted to sponsor a group health plan for Medicare-eligible retirees.

"Unlike in the past, our new management team didn't want a benefits strategy that strictly relied on benefits offerings as the sole reason to attract and retain employees," said Mary Lehnert, global benefits manager at the company.

Lehnert recently spoke at a Washington, D.C. conference on managing retiree's health care costs amid economic and political changes. The two-day event was sponsored by the World Research Group, a New York-based health care conference planner.

The new senior executives sought a competitive, market-based benefits program that was judged on how well the company delivered it. Under the new philosophy, the company had to focus more on active employees.

The company employs about 1,200 U.S. workers, with an average age of 48 and a tenure of 22 years. Lehnert said H.B. Fuller's retiree population will soon outpace its active population.

The Minnesota-based company—which manufactures adhesives, sealants, paints and other specialty chemical products—in 2010 will start transitioning some of its retirees from its group plan to individual Medicare plans.

The 120-year-old company, which started its retiree benefits program in 1945, has partnered with a Medicare coordinator to help with the transition.

Lehnert told attendees that when H.B. Fuller sent out letters informing retirees who were eligible for the transfer, she received some calls from individuals, saying, "I got this communication, but did you mean me?"

And of course, her team had to educate the company's workforce about the transition without creating any noise. "There is a very strong intolerance within the company to any type of negative feedback from retirees and current workers," she said.

With that in mind, Lehnert's team steered clear from conducting retiree group meetings, believing such sessions tended to become airing-my-grievances and remember-when sessions. "We felt that one-on-one consultation with a representative from the coordinator was much more effective than group meetings," she explained.

To prepare retirees for the transition, the company published a list of what retirees could expect in 2009 as they transition to the individual market. "As you know, Medicare Advantage rates don't come out until October 2009. But people want to make decisions now," Lehnert noted.

Her team is helping retirees to record their medical expenses, so when they do talk to the Medicare coordinator in October, they will have a detailed record of what their expenditures are. The experience also gives them a sense that they are participating in this new trend.

"We were looking for an easy-button approach for our retirees that could also guarantee that our retirees could trust the information offered by the Medicare coordinator," Lehner said. "We didn't want our retirees to feel as if we were cutting them off."

The coordinator had to have a business model in which its benefits specialists were not compensated based on plan selection, but on customer satisfaction.

"We did not want to face the question of whether the people who were advising our retirees on their plan options were offering incentives based on plan selection," Lehnert said. "It's really easy to get caught up in numbers when dealing with cost-containment measures for retiree health, but you have to put a human face on those numbers."

Individual market could yield 'better choice'

"The potential for those of us on the HR and benefits side is to look at retirees as a group of people and not as individuals with specific health care needs," said John Connor, a principal at Transition Assist, a Massachusetts-based Medicare coordination firm. H.B. Fuller hired Transition Assist as its Medicare coordinator.

"Many employers have a group-market mentality and believe it's counter-intuitive to think that you might have a better choice of plans on the individual market than the group market," said Brain Poger, president and CEO of Senior Educators, a Medicare-coordination firm based in California. From a sustainability perspective, "health care is administered locally and not nationally, so there is a benefit to being on the individual market," he explained.

Employers are trying to keep their "promises to workers who help build the company," said Noel Obourn, executive vice president of national accounts at Extend Health. The California-based company helps employers to transition retirees from a legacy group medical plan to an account-based plan.

Obourn recommends that employers embrace four strategic ways to rethink retiree health benefits: integrate health security into retirement education and financial planning; ensure access and choice; consider integrating account-based DC plans; and enable stewardship of benefits.

Retiree health benefits at a glance

46% — Early-retiree medical coverage is becoming increasingly rare, with just 27% of large employers still offering it to new hires, down from 46% 15 years ago.

19% — Among employers with 20,000 or more employees, coverage for Medicare-eligible retirees has slipped to 19% percent of all large employers.

7% — Retiree coverage is very rare among smaller employers; among those with 10-499 employees, just 7% offer it.

64% — Among employers offering retiree benefits, the average age of retirement in 2007 was 61; among employers without retiree coverage, the average age of retirement was 64.

17 % — For both pre-Medicare-eligible and Medicare-eligible retirees, 17% of large employers reduced benefits in 2008 by raising retiree contribution, increasing cost-sharing or limiting covered services.

1/5 — Large employers are using an increasing variety of strategies to manage retiree medical costs. Over one-fifth of all large retiree plan sponsors and 43% of those with 20,000 or more employees used a cap to limit their obligation in 2008, and another 8% are considering using a cap in the future.

9% — Voluntary employee benefits associations (VEBAs) were used to fund benefits by 9% of employers, while 9% moved from self-insured to fully insured retiree coverage to control costs.

8% — About 8% of large employers currently reimburse retiree coverage premiums for retirees who obtain their own coverage, and another 3% are considering premium reimbursement. Combined, over a fourth of sponsors (28%) have placed limits on their retiree plan obligations.

Source: Mercer

6 musts for managing health care costs in retirement

1. Set aside money specifically for medical needs. Rather than saving generically for retirement, have a separate savings account, such as an HSA, specifically for medical expenses in retirement.

2. Investigate the cost of supplemental health insurance in various geographic locations. Supplemental insurance reimburses individuals over age 65 for some or all of their cost-sharing not covered by traditional Medicare. Medicare's official Web site (medicare.gov), as well as many state Web sites list the supplemental health plans available, including those for Medicare Part D. As individuals approach retirement, they should become familiar with their plan options, the costs and how these vary by location.

3. Consider phased retirement as part of an overall strategic plan. Many employers offer part-time work with health care benefits. This type of employment can allow pre-retirees to avoid dipping into their savings too soon for health care needs.

4. Be proactive in preventive care. Get routine doctor-recommended screenings, maintain recommended preventive care guidelines and take prescription medications according to schedule.

5. Select quality providers. On the Department of Health and Human Services Web site, www.hospitalcompare.hhs.gov, there is information available on how well hospitals nationwide are caring for patients who have certain medical conditions or have undergone various surgical procedures.

6. Always review health claims for accuracy. It is not uncommon for mistakes to happen in the claims payment process. The error could be in many forms, including charges for services not rendered or incorrect charges for a given service. Review bills and follow up with health care providers with questions about billing.

Source: Fidelity Investments

New Part D subsidy resources available

The Centers for Medicare and Medicaid Services has released new resources for employers applying for the Part D retiree drug subsidy (RDS). CMS' new RDS User Guide includes how-to documents, along with FAQs addressing how to correct submitted drug costs, payment requests or retiree lists after an application has completed reconciliation. Visit: http://rds.cms.hhs.gov/user_guide.