Come April 2022, more than a quarter million retired New York City government workers and their dependents are expected to transition from traditional Medicare to privatized health insurance. The city's move to insure retirees under a Medicare Advantage plan represents a trend among self-insured customers that has accelerated nationwide over the past decade.
In December, 5 million MA members came from group plans sponsored by unions or employers, up 6% year-over-year and 132% from the 2.1 million enrollees a decade ago, according to the latest federal data. While enrollment through group plans represents a small portion of the 27.2 million total MA enrollees, these plans are growing in popularity as companies look to attract and retain talent during the Great Resignation and governments look to cut healthcare costs and offer additional benefits, said Brad Ellis, senior director of insurance at Fitch Ratings.
By offering retirees an MA plan through Anthem, for example, city and union leaders estimate they will save more than $600 million in healthcare costs, although the deal does face legal challenges. New York retirees' new MA plan was initially supposed to go live Jan. 1, but union workers and other insurers' questions over Anthem's $34 billion five-year contract pushed the start date bck. Anthem counts the fourth-most MA enrollees in the nation; UnitedHealth Group is the largest MA insurer.
In 2021, one in five MA members were enrolled through a group plan in the U.S., according to the Kaiser Family Foundation.
"In this environment, you could see more employers just adding that as a retirement benefit to attract employees," Ellis said. "It's just hard to tell how long this employment environment we're in right now will last, where it's an employee's market."
Companies have long offered group MA plans for workers, attracted to the extra benefits not offered in traditional Medicare, care coordination services provided, and employees' familiarity with being in a limited network managed by an insurer, said Emma Hoo, director of value-based purchasing at the Purchaser Business Group on Health, a coalition of about 40 large companies including Costco, Microsoft and Walmart.
Because payment depends on the risk of the company's retiree employee population, MA plans are not necessarily cheaper than traditional Medicare, although they do offer employers more predictability in underwriting patient risk since customers pay insurers a flat monthly fee to manage individuals' care, she said. This predictability is particularly attractive as healthcare costs and drug prices continue to rise, Hoo said.
"Recently, carriers have been expanding their MA offerings in other markets, making it more of an opportunity to be a national offering for multistate employers," Hoo said.
By expanding their MA plan coverage area, insurers could be looking to attract employers with remote workforces, she said. Companies could also be looking to add the benefit to retain older employees amid record levels of early retirements, said Paul Tyler, chief marketing officer of Nassau Financial Group investment manager.
More than 3 million Americans retired early because of the COVID-19 pandemic, thanks to a surge in stock prices and housing values allowing young baby boomers with assets to stop working, according to an October report by the St. Louis Federal Reserve. Real net worth of Americans aged 55 to 64 rose by 14.2% between the fourth quarter of 2019 and the second quarter of 2020, the report said. The U.S. workforce is more than 5 million people short of pre-pandemic levels, making early retirements the primary reason for missing workers, according to the report.
"A number of companies have been focused on retaining older employees, and the focus has been on what are the additional benefits we can put on our plate to retain older employees but also keep some of the younger ones," Tyler said. "The Great Resignation's really put a spotlight on ancillary benefits in a way that we never seen in the last 20 years."
Ironically, individual MA plans could be accelerating individuals' retirement plans, he said. Because these plans typically offer cheaper deductibles than traditional Medicare, individuals could be budgeting less money for health insurance retirement expenses, Tyler said. The pause on travel could also have changed individuals' provider network needs, he added.
"The fact that it's potentially cheaper potentially solves a lot of anxiety around healthcare and will encourage people to take earlier retirements," Tyler said. "I don't have hard data on that but, anecdotally, that's what I've seen."