Turning Medicare Headaches Into Broker Opportunities

For decades, benefit consultants advised companies to pool retirees with active employees for health care benefits–a strategy that was fine before prescription drug and other health care costs soared and when active workers outnumbered retirees, who usually didn’t live long after leaving the work force.

Today, companies are urged to carve out retirees from the active population and address their health care needs with a separate plan. The benefits for companies include:

–Reducing the costs of administering retiree health care. This includes taking the burden off overworked human resources staff, shifting the cost of health care processing and oversight, and reducing accounting responsibilities;

–Consolidating into one single plan and eliminating the patchwork of contracted health care providers that most national companies are forced to put together when they self-insure;

–Taking the costs for health care commitments to retirees off the current books by turning them into an ongoing, certain expense instead of a future, estimated liability; and

–Beginning the process of recasting the responsibility for retiree health care, shifting from a defined benefit commitment to a defined contribution approach that provides more stability in future expenses for the company.

Brokers who are wary of Medicare Part D because of the negative headlines should know the time is right to view the prescription drug program as a real moneymaker. In 2006, many companies opted for the federal government’s 28% subsidy to continue their existing retiree drug plans. But now they are suffering under the weight of the federal government’s considerable administrative burden of qualifying for the subsidy and are searching for a way out.

What’s more, many companies are abandoning the subsidy as too costly and are seeking private-sector solutions to their prescription drug headaches. One large Midwestern manufacturer, for instance, gave up the subsidy and is saving 55% on out-of-pocket costs and also sliced co-pays for retirees in half just by going into the private market. That’s just the beginning, as many more employers will shift their retirees to Part D in 2007.

The savvy broker can begin calling companies, not merely to offer a price quote but to help potential customers adopt a new strategy. By providing a customized solution–which can include an employer Medicare Part D solution, small group plans and other options–brokers can turn 2007 into a year of opportunity.