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Keeping Early Retirees Afloat
Old 06-23-2007, 08:42 PM   #1
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Keeping Early Retirees Afloat

http://www.nytimes.com/2007/06/23/bu...=1&oref=slogin

I hope this hasn't been posted yet. I also hope this is a growing trend.
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Old 06-23-2007, 10:59 PM   #2
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All about bargaining power. Large employers can offer early retirees health plans. But small employers are eliminating insurance even for current employees.
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Old 06-24-2007, 03:36 AM   #3
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It's about time. Unfortunately our government has not done the same thing. It is ridiculous that affordable health care is not available in this country. Our elected legislature and executive branch should be ashamed.

It is a problem that can be solved.
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Old 06-24-2007, 09:41 AM   #4
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All about bargaining power. Large employers can offer early retirees health plans. But small employers are eliminating insurance even for current employees.
True. Which is why I think it's important that some anti-trust laws be revised to allow small businesses to "team up" to form their own larger groups. That's the only way they'll have the critical mass to effectively compete with larger businesses in terms of health care costs.

Anyway, this plan is similar to something I've thought about for a long time: Even if businesses don't fund early retiree health care much any more, why can't they at least set up group plans that retirees can use to gain guaranteed-issue insurance?

Many businesses today seem to want to cut back on the number of higher paid, older and more experienced workers on their payroll. This would certainly be a potential way to do that; with less worry about health insurance if someone leaves their job, the decision to leave would be easier. I just wish they'd make 50 the eligibility age, not 55.
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Old 06-24-2007, 01:41 PM   #5
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I know this article is from the NY times....but to blame business for these problems isnt going to go anywhere...on the contrary, I thought this board was under the consensus that health insurance needed to be removed from work...
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Old 06-24-2007, 02:46 PM   #6
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I know this article is from the NY times....but to blame business for these problems isnt going to go anywhere...on the contrary, I thought this board was under the consensus that health insurance needed to be removed from work...
It does. But until this happens, it's better than what we have now, because it crosses multiple employers and doesn't tie you your job any more (at least once you reach 55). It at least partially addresses the "golden handcuffs" a lot of workers have -- the fear of needing to qualify for individual health insurance with pre-existing condition exclusions and exorbitant rates for people with certain medical conditions.

It would be better still if these groups could be created apart from employers, or at least could be available to anyone terminating service regardless of age...but this is still better than nothing.
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Old 06-24-2007, 02:48 PM   #7
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Hmmmm, very interesting,...... according to a recent ABC News/Kaiser Family Health study, insured Americans are overwhelmingly (89 percent) satisfied with their own care, while broadly concerned about rising costs of prescription drugs and critical of the care others receive.
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Old 06-24-2007, 02:58 PM   #8
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Our elected legislature and executive branch should be ashamed.

Good news is, by the end of the week there wont be anyone left in the executive branch...
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Old 06-24-2007, 05:59 PM   #9
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True. Which is why I think it's important that some anti-trust laws be revised to allow small businesses to "team up" to form their own larger groups. That's the only way they'll have the critical mass to effectively compete with larger businesses in terms of health care costs.

Anyway, this plan is similar to something I've thought about for a long time: Even if businesses don't fund early retiree health care much any more, why can't they at least set up group plans that retirees can use to gain guaranteed-issue insurance?

Many businesses today seem to want to cut back on the number of higher paid, older and more experienced workers on their payroll. This would certainly be a potential way to do that; with less worry about health insurance if someone leaves their job, the decision to leave would be easier. I just wish they'd make 50 the eligibility age, not 55.
In Colorado, the Presbyterian churches all got together and created something like an "association plan" ( a bunch of small groups all came together into one large group) and they created their own, large, self-funded, health insurance plan. They made the benefits very rich (low copays, deductibles, etc.) and they made the premiums very cheap. Guess what happened? They drove their own insurance plan out of business. The claims were more than what they could muster up in premiums.

To answer your question: "why can't they at least set up group plans that retirees can use to gain guaranteed-issue insurance?" It's really not that easy. Large companies are typically "self insured". This means that they hire insurance companies to administer their plans, but they pay their own claims out of the premiums they collect from their groups. If they have too many claims and not enough premiums, then they make a claim with their "re-insurer" (like Lloyds of London) who protects them in the case that they don't collect enough premium to pay for all of their own claims. So, in order to setup groups strictly for retirees, they'd have to charge really high premiums in order to be able to handle all of the claims....the premiums would be no different than a state-guaranteed plan or risk pool type premium.
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Old 06-28-2007, 09:17 AM   #10
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All about bargaining power. Large employers can offer early retirees health plans. But small employers are eliminating insurance even for current employees.
We have around 300 employees of which 150 - 200 participate in the health insurance plans we offer. Our costs have increased anywhere from 15% to 25% each year for the last 5 years. We fool around with the various deductables, riders, etc in an effort to reduce the amount of increase, but I fear it may just reach the point where it is unaffordable.
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Old 06-28-2007, 10:20 AM   #11
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We have around 300 employees of which 150 - 200 participate in the health insurance plans we offer. Our costs have increased anywhere from 15% to 25% each year for the last 5 years. We fool around with the various deductables, riders, etc in an effort to reduce the amount of increase, but I fear it may just reach the point where it is unaffordable.
Have you tried an HRA yet? With an HRA, the employer and employee share the deductible. Here's how it works. The employer offers a high deductible healthplan with a lower premium, then they put the premium savings in an HRA (health reimbursement arrangement) for employees to use once they reach their portion of the deductible. You set a certain amount that employees have to be responsible for before they can start using their HRA money. Typically, it's about 500 or 1000 dollars. If the employee reaches their limit, then the HRA kicks for the "middle portion" of the deductible. Companies like UHC have it setup where the HRA money automatically kicks in for claims once the employee reaches their personal out of pocket limit. After the next 500 or 1000 or so is paid by the HRA, then the employee has to again pay for the last portion of the deductible out of their own pocket. What the employees don't use rolls over to year two, and so on. However, once the employee terminates, the employer gets to keep the HRA balances to use towards new employees.

It's a great way to satisfy both the employee AND save a lot on health insurance premiums.
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Old 06-28-2007, 11:13 AM   #12
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We have not used the HRA. It is not clear to me how the employer saves any money if I simply redirect dollars that would have been spent on premiums to an HRA pool. Also, the use it or lose it nature of the plan may be a turn off to plan participants.
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Old 06-28-2007, 11:47 AM   #13
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We have not used the HRA. It is not clear to me how the employer saves any money if I simply redirect dollars that would have been spent on premiums to an HRA pool. Also, the use it or lose it nature of the plan may be a turn off to plan participants.
OK - here's how you save. Number one, instead of throwing the money away on premiums, your putting money into a tax-advantaged account for employees to use IF THEY NEED TO. See, the mistake you are making is you are assuming that the employees are going to USE all of the HRA money you give to them each year --- but they are not, and here's why: since employees are responsible for a certain percentage of the deductible, they are less likely to overutilize, while on the otherhand, they are protected after a relatively low out of pocket limit (say 500-1000). Also, there is a HUGE incentive for them not to get into their HRA money if they don't absolutely have to because it is NOT a use it or lose it type of plan. If employees DONT use their HRA money, the money rolls over to the next year to protect them even more from out of pocket costs should they have a major medical claim later on! ....and that's the great thing about HRAs.

Now, they don't get to take the money with them when they leave the company, but that just makes it even more of an incentive for them to stay with your company and it helps employee retention figures. Employees who know they are going to lose their built up HRA money when they leave the company are going to be less likely to quit on a whim. The less often you have to train new employees, you WIN!
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Old 06-28-2007, 01:39 PM   #14
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OK - here's how you save. Number one, instead of throwing the money away on premiums, your putting money into a tax-advantaged account for employees to use IF THEY NEED TO.
Ok, so far I haven't saved any money, the company is simply redirecting the cash to the HSA pool....correct?
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Old 06-28-2007, 01:42 PM   #15
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Now, they don't get to take the money with them when they leave the company
It appears at this point, the company could save money by using the dollars left behind by departing employees to off set the current year cash contributions....correct?
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Old 06-28-2007, 03:26 PM   #16
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Ok, so far I haven't saved any money, the company is simply redirecting the cash to the HSA pool....correct?
Actually, it's an HRA pool (health reimbursement account - a little different than an HSA). But yes, you have saved money, because the money you put in your HRA is yours (belongs to the employer), not the insurance company's, and it's only spent if the employees use it. Most of the time, much of the money is not used, so it rolls forward - and all the while, the employer earns interest on the HRA account - instead of giving it to the insurance company in the form of premiums. There are algorithms that can be used to estimate how much of the HRA money will actually be used, and how much will roll forward each year.

The other thing is that a health re-imbursement arrangement is a PROMISE to pay IF an employee needs it. You only have to put away a small percentage each year of the estimated amount that will be used, but not the whole amount that you think will be used....you would only have to add extra to the account if someone came in with a claim, and the insurance company would let you know if there was a requirement, at which time, you'd put more money in.

With an HSA, you have to make a committment to put so much away for each employee, but with an HRA, you don't. With an HRA, you can start your account with only a percentage of expected usage and then add money to the account only if necessary.
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Old 06-28-2007, 10:19 PM   #17
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It appears at this point, the company could save money by using the dollars left behind by departing employees to off set the current year cash contributions....correct?
Roadkill, I see what you're getting at...if your company is self-insured or partially self-insured, there is not going to be as much savings with an HRA design as there would be if it were fully insured (not self-insured). So true, your biggest savings would be in dollars left behind by departing employees.

I work with a lot of small employers, and I wasn't thinking in "large group" mode with the HRA concept. Anyways, it really all depends on the way your company is insured as to which system will work the best for you.
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Old 06-29-2007, 11:49 PM   #18
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I jumped into this conversation by simply pointing out what we have experienced as a small employer. My experience reinforced Martha's point that many small employers are reaching the position of not being able to offer affordable insurance to their employees. We spend a lot of time tyring to game the system in an effort to reduce cost. Unfortunately, it's not working and at some point, employers are gonna cry uncle and throw in the health insurance towel.
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Old 06-30-2007, 07:19 AM   #19
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Universal Healthcare, See Sicko.
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Old 06-30-2007, 09:20 AM   #20
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I jumped into this conversation by simply pointing out what we have experienced as a small employer. My experience reinforced Martha's point that many small employers are reaching the position of not being able to offer affordable insurance to their employees. We spend a lot of time tyring to game the system in an effort to reduce cost. Unfortunately, it's not working and at some point, employers are gonna cry uncle and throw in the health insurance towel.
..And this is exactly why I advocate against employer-sponsored coverage. I don't think employers should be responsible for peoples healthcare AT ALL. I'd much rather see laws changed to make it easier for people to get at least some kind of affordable, basic, portable coverage in the individual market.

But for now, we must deal with the hand we are dealt with. I was just trying to be practical in explaining the HRA concept to you. If your company is not self-insured, then you could probably save literally thousands by switching to an HRA. If your company is self-insured or partially self-insured, the savings would not be as great.
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