According to the WTW Retiree Medical Survey, half of employers (50%) are concerned about rising costs for providing medical benefits to retirees. These costs for non-Medicare retirees are expected to rise by 4.8% next year, up from 3.6% this year. Medicare-eligible retirees' costs are expected to rise 2.7% next year, up from 2.1% this year.
"With significant cost increases on the way, employers aren't sitting still." For the time being, they are committed to providing retiree healthcare benefits and a positive retiree experience. "However, they are looking for ways to provide them at a lower cost," said Lindsay Hunter, senior director, Health & Benefits, WTW. "Employers are understandably concerned about this growing burden, and they are researching all options, including private marketplaces."
One-eighth of respondents (13%) expect to make changes to their retiree medical benefits over the next three years, according to the survey. Because the benefits are too expensive for the company to maintain, nearly half (49%) expect to implement change. Over a third (36%) want to address unacceptable financial risks, while 33% want to reduce the administrative burden of the plan.
According to the survey, more than one-fifth of employers (22%) have either discontinued or are considering replacing a traditional group medical plan for early retirees. 75% of employers that have terminated a group plan are replacing it with access to and financial assistance for individual insurance through a private marketplace. Similarly, those looking for a replacement are looking to the private market.
"With the recent passage of the Inflation Reduction Act, private insurance marketplaces for individual coverage are becoming an even more appealing option for retiree benefits." "The extension of premium tax credits and improvements to Part D plans, in particular, position private marketplaces to better offset rising healthcare costs for both organizations and their retirees," said Trevis Parson, chief actuary, Via Benefits, WTW.
About the survey
The 2022 Retiree Medical Survey included 122 U.S. employers and was conducted in July and August 2022. Respondents employ approximately 1.9 million people.
About WTW
We offer data-driven, insight-led solutions in the areas of people, risk, and capital at WTW. We help organizations sharpen their strategy, improve organizational resilience, motivate their workforce, and maximize performance by leveraging the global perspective and local expertise of our colleagues serving 140 countries and markets.
Working together shoulder to shoulder