Among Employers Offering Retiree Health Benefits, More Are Turning to MA Plans

While few employers provide retiree health benefits, the ones that do are using Medicare Advantage plans more and more, a new analysis found.

Currently, only 13% of large employers — or companies with 200 or more employees — offer retiree health benefits, the Kaiser Family Foundation (KFF) report showed. Of this group, 50% provide these benefits through a Medicare Advantage plan, up from 26% in 2017. 

For firms with 5,000 or more workers providing retiree benefits, 60% use Medicare Advantage plans, up from 29% in 2017.

Additionally, of the large firms providing retiree benefits with a Medicare Advantage plan, 44% don’t offer any other choice for coverage, the survey discovered. 

The KFF report relied on data from the 2022 KFF Employer Health Benefits Survey. KFF worked with NORC at the University of Chicago and Davis Research to conduct the survey, which included interviews with business owners and human resource and benefits managers at 2,188 firms.

A major reason for firms turning to Medicare Advantage plans for retirees is financial. About 27% of all large firms chose these plans due to cost; 20% of firms with 200 to 999 workers and 42% of firms with 1,000 or more workers selected cost as the top factor driving their decisions. Other reasons cited for choosing MA plans were their administrative simplicity, better coverage options and flexibility for enrollees.

This shift could have several effects on retirees, KFF said.

“As the share of large employers offering retiree health benefits to Medicare-eligible retirees continues to decline, firms that still offer these benefits are increasingly turning to Medicare Advantage, often to lower their own financial liability, which raises questions about the implications for retirees, employers and the Medicare program,” KFF stated in the report. “For some large employers, the shift to Medicare Advantage appears to be a strategy to maintain benefits for their retirees, without terminating coverage or adopting other changes that more directly shift costs onto retirees.”

One of these implications is the impact this approach could have on retirees’ access to physicians and hospitals, the report said. They’ll also have to go through prior authorization, which could limit their access to some services. If they’re not happy with their network, they would have to completely give up their retiree benefits, KFF said.

Another implication is the impact on Medicare spending, as Medicare pays more for enrollees in Medicare Advantage plans than traditional Medicare, according to KFF.

The report comes as Medicare Advantage enrollment in general is becoming more popular. A separate KFF report found that about 48% of Medicare beneficiaries are enrolled in Medicare Advantage plans. This number could cross the 50% threshold as soon as next year.

At the same time, there is a growing desire to scrutinize MA plans given that some believe they are misleading for seniors and actually drive up costs for the Centers for Medicare and Medicaid Services. CMS recently released a requirement — effective January 1 — that bans MA plans from advertising on television without approval from the agency.

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