Best in (Retiree) Class

By: Paul V. Shaheen, REBC, RHU, Vice President / Employee Benefit Solutions

For years, many employers have considered offering group medical coverage for their retirees. Still, they have often been reluctant to do so, fearing increased claims and hence less than favorable group medical financials and renewals. 

While new concepts have evolved over the years to help solve this problem (such as retiree carve out plans), there is at least one viable option available, especially for groups in the under 50 life (Accountable Care Act) space. 

If your group falls in this category, adding a retiree class to your group medical plan is much easier. Why? Because if you’re under 50 employees, your claims, remember, bear NO impact on your annual renewals, so it doesn’t matter how many claims are filed nor where they originate. 

Even though more of us are working well past average retirement age, under age 65 retirements are still not uncommon. When that happens, retirees, once either state continuation or COBRA benefits expire, are forced to look to the individual market, where coverage up to now has been limited and by far more expensive than group coverage. 

So try this: at your next renewal, check off ‘retiree class’ on your renewal paperwork. So long as any soon-to-be-retired employee is age 55 or older and has been employed at your company for at least ten years, allow them to stay on your plan but of course at their expense, if you so choose.  This gives them greater flexibility, especially to maintain coverage for themselves as well as their dependents.

That said, there is one caveat.

Once the retiree turns 65, the individual needs to go off your plan and move into Medicare/Medicare supplemental coverage. The biggest reason for this is if you are classed as a retiree, then turning 65 does not count as a COBRA (or state continuation) qualifying event. 

Further, if your group is under 20 lives, where group coverage is secondary to Medicare, your group carrier may pay claims assuming you do have Medicare, which could easily cause claim complications. Moreover, if you didn’t take Medicare at that point, waiting until later will likely cost you penalties for delayed Medicare enrollment. 

Things continue to get trickier in the group medical market, but with some planning and forethought, you can stay ahead of the game, smooth out the bumps in the road, and maintain a plan that’s affordable and flexible for all.