More large employers and unions turn to Medicare Advantage to offer retiree health benefits

More and more employer and union-sponsored retiree health plans are offering Medicare-eligible coverage through Medicare Advantage (MA), a new analysis finds. 

The analysis from the Kaiser Family Foundation, released Thursday, comes as MA is expected to surpass traditional Medicare in total enrollment for 2023 and more insurers enter the lucrative market. Employers and unions are turning to MA in a bid to control retiree healthcare costs. 

“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,” the analysis said. “However, the shift to Medicare Advantage has implications for retirees that extend beyond supplemental benefits.”

Kaiser relied on data from its 2022 employer health benefits survey of large private and nonfederal public employers. It showed that half of the large employers with 200 or more workers are offering health benefits to retirees through an MA contract, nearly double the 26% doing the same in 2017. Another 44% that offer MA coverage to retirees don’t give them another choice in coverage. 

Among the companies with 2,000 or more employers, 60% offered benefits through an MA plan. The top reason such companies turn to MA is to combat higher costs, with 42% citing it as a reason compared with 14% for flexibility for enrollees. 

Unlike traditional Medicare, MA relies on provider networks and cost management tools to cut down on costs. Kaiser warned that this shift toward MA has some unintended consequences for retirees. 

“This approach has potential to restrict retirees’ access to doctors and hospitals, depending on the plan’s provider network, and subject retirees to cost management tools, such as prior authorization, that may limit access to Medicare-covered services,” the analysis said. 

Kaiser cited a recent move by New York City to move its city worker retirees to an MA plan, a decision that is on hold after the insurers Elevance Health and Empire Blue Cross Blue Shield dropped out, according to a published report on The City news site. 

The MA market has grown in popularity among seniors in recent years. The program has also received heightened scrutiny surrounding overpayments to plans based on inaccurate risk scores and aggressive marketing tactics by agents and brokers.

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