My father was a lifelong member of the local Steamfitters union. When he hung up his green work cap for good in 1982, he enrolled in Medicare Part A, hospital insurance, and Part B, medical insurance, and the retiree plan. He had that coverage until he died.
Back in my father’s day, signing up for the retiree plan was the way to go. Two-thirds of large firms offered healthcare coverage to retirees in 1988. In 2022, on the other hand, just 13% offered retiree health benefits to Medicare-age retirees.
There has also been a very significant change in the type of retiree coverage employers and unions offer. My father’s plan worked very much like the Medigap policies of today. It was the secondary payer with Medicare as primary, covering the costs that Medicare didn’t, such as the hospital deductible and 20% Part B coinsurance. And, he had his choice of any physicians who saw Medicare patients.
But then, Medicare Advantage plans appeared. I remember getting a call in 2014 from an unhappy retired Illinois teacher. The Teachers’ Retirement Insurance Program (TRIP) changed a retiree’s option to only a few Medicare Advantage plans. TRIP was one of the first to opt for Advantage retiree plans and, by 2017, 26% of employers had taken that path. Today, half of large employers offering health benefits to Medicare-age retirees do it through a contract with a Medicare Advantage plan. Big names making the change recently include IBM, AT&T, and American Airlines Flight Attendants. Medicare Advantage coverage for New York City’s 250,000 retirees was going to start on September 1 but that’s on hold after a judge’s ruling.
A big factor driving this shift, of course, is money. KFF Health News notes that “employer-sponsored plans receive billions of dollars in federal payments” and that the government is paying most of the healthcare costs. New York City alone could save up to $600 million annually by switching to Medicare Advantage for its retirees.
Living with retiree coverage
If you’re Medicare-eligible and considering a retiree plan or already have one, remember these three points.
- Retiree coverage can be a lifelong option so choose wisely.
- The plan is in charge.
- Know that the coverage can change. According to the Department of Labor, unless it is specifically forbidden in the retiree plan documents, companies reserve the right to modify, revoke, suspend, terminate or change the program at any time.
For companies and unions that decide to change to Medicare Advantage plans for retirees, the Centers for Medicare and Medicaid Services (CMS) has the statutory authority to “waive or modify requirements that hinder the design of, the offering of, or the enrollment in, employer/union sponsored Medicare Advantage plans.” In other words, CMS can change the rules to facilitate companies putting these plans into place. One example: A retiree reported that his opt-out decision was due in less than 30 days, but he still had not received information to determine whether his physicians would be in-network under the new Medicare Advantage options.
If there are changes to your retiree plan, proceed carefully.
- Go beyond the company and plan’s promotional information.
- Scrutinize the summary of benefits and Evidence of Coverage.
- Pay attention to costs and benefits.
- Check out coverage for your medications and whether you can see the same physicians and healthcare providers.
- Investigate the prior authorization requirements.
If you want the new coverage, you’ll likely be auto-enrolled and won’t have to do anything. However, if you don’t want it, things get more complicated so do some research.
- Determine whether you can continue with your current plan. Almost 45% of employers offering Medicare Advantage plans do not give retirees that choice. If you can keep it, you’ll likely have to pay the full cost.
- Find out whether you’ll lose any other retirement benefits if you opt out. With some of the recent changes, retirees would lose Part B premium reimbursement, subsidies, and/or dependent coverage.
- Investigate your options to qualify for other Medicare coverage. This can be complicated because it can depend on other factors, such as your ZIP code, health status, and terms of the contract.
- Don’t miss any deadlines. The sponsor likely has an opt-out date. Miss that and you’ll be enrolled automatically.
In the last years of my father’s life, as his power of attorney, I dealt with the retiree plan and never had a complaint or issue. I only wish I had that kind of coverage. But unfortunately, that was then, this is now, and things have changed dramatically for retirees.
Companies and unions that opt for Medicare Advantage retiree plans try to make the transition easy; the plan enrolls you. But don’t be steered into an unknown direction. If you say calm and pay attention, it is possible to come up with something that works for you—in spite of it all.