One in eight employers expect to make changes to their retiree medical benefits over the next three years, according to new data from Willis Towers Watson, whose 2022 Retiree Medical Survey queried 122 employers that employ about 1.9 million workers. Nearly half (49%) say they expect to introduce changes because the benefits are too expensive for the company to maintain. Over a third (36%) are looking to address unacceptable financial risks, while 33% cited the need to reduce the plan’s administrative burden.
What it means to HR leaders
Like most aspects of healthcare benefits, employers are thinking about how to hold down spending as medical costs continue to increase. And retiree healthcare benefits are no exception.
Indeed, the WTW Retiree Medical Survey found half of the employers (50%) are concerned about increases in their costs to provide medical benefits for retirees. These costs for retirees who aren’t eligible for Medicare are projected to increase 4.8% next year, up from 3.6% this year. Costs for Medicare-eligible retirees are projected to rise 2.7% next year, up from 2.1% this year.
For now, organizations remain committed to offering retiree healthcare benefits and a positive retiree experience, notes Lindsay Hunter, senior director of health and benefits at WTW—but they’re looking for ways to provide them more cost-effectively.
“Employers are rightfully concerned about this growing burden and are studying all options, including private marketplaces,” Hunter says.
The survey finds that 22% of employers have either stopped offering a traditional group medical plan to early retirees or are considering a replacement. Among those employers that terminated a group plan, 75% are replacing it with access to and financial support for individual insurance through a private marketplace.
Other research has pointed to a growing increase in medical and healthcare costs for employees. It’s a problem that employers surely want to rein in, but many experts warn that cutting benefits or transferring costs to employees could cause problems as they try to attract or retain talent.
To learn more about rising healthcare costs and strategies to contain them, don’t miss HRE’s 2023 Health & Benefits Leadership Conference, which will be held from May 3-5 in Las Vegas. Learn more and register here.