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November 15, 2013

Health insurance marketplace could land early retirees

Retirees who are younger than 65, and, thus, not yet eligible for Medicare, could get pushed into the new health care marketplace whether they like it or not.

Moving retirees to something like the marketplace or a defined benefit plan where employers can predict their future costs “has been on the radar for our members for a couple of years,” said M. Christine Whipple, executive director of the Pittsburgh Business Group on Health, an association of some of the area’s largest employers.

The reason is simple: Retirees younger than 65 make for expensive health insurance beneficiaries.

“They are probably 75 to 150 percent more expensive than an active employee,” said Lorin Lacy, principal for the health and productivity group at Buck Consultants in Pittsburgh.

“Clearly, as we see more global competition for employers in the U.S., other countries’ employers don’t feel that obligation of having health care costs for people who are no longer production people,” he added. So, now every American employer “is looking for ways to minimize that or get out of it completely.”

As health care costs have risen, the percentage of employers offering health insurance for early retirees has steadily declined in the past decade, dipping to 24 percent in 2012, according to the consulting firm Mercer.

Paul Fronstin of the Employee Benefit Research Institute in Washington, D.C., says there were 5.3 million retirees ages 55 to 64 in 2012 and an additional 4.7 million who were not working because they were ill or disabled.

The trend away from offering early retiree health insurance undoubtedly will make the health insurance marketplace an appealing option for employers “without feeling like they have betrayed their former workers,” Lacy said.

Ray Landis, the Harrisburg-based advocacy manager for AARP in Pennsylvania, said he, too, believes “we are going to see employers push pre-Medicare retirees into the exchange,” because employers were already looking for options to the increasingly expensive health coverage.

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