A growing number of employers that sponsor retiree health benefits are offering coverage through a Medicare Advantage contract, also known as an Employer Group Waiver Plan (EGWP), a KFF survey shows.1 For some, an EGWP is the only retiree health coverage offered.
KFF found that 52% of organizations with at least 200 employees that sponsor retiree health benefits offered MA plans this year, up from 50% last year and 45% in 2021. Drilling down by number of employees:
- 52% with 200 to 999 workers contracted with an MA plan this year
- 47% with 1,000 to 4,999 workers contracted with an MA plan this year
- 62% of employers with 5,000 or more employees offered MA coverage this year.
At 65% of these firms, MA is the sole option offered.
Among other findings from the survey:
- 16% of firms that offer retiree health coverage but not MA said they are at least somewhat likely to offer an EGWP in the next two years
- 63% of public employers offer retiree health benefits, compared with 10% of private for-profit and 17% of private not-for-profit organizations
- 26% of large firms with a relatively high proportion of high-income workers offer retiree health benefits, compared with 19% of employers with a smaller proportion of high-income workers
- 90% of large employers that offer health benefits to active and retired workers also offer coverage for spouses.
Primary reasons for contracting with an MA plan for retiree benefits include lower costs for retirees, flexibility for enrollees, lower costs for the company, better coverage and ease of administration.
What does this mean for MA plans?
EGWPs are a growing market segment for MA. CMS payments to EGWPs are based on bids from non-EGWP individual MA plans and are set as a percentage of the area benchmark. Because of the wide geographic distribution of retirees, around 75% of EGWPs are structured as preferred provider organizations, so achieving savings can be more challenging than for HMO plans.2 However, EGWPs are also eligible for quality bonus payments, which averaged $460 per enrollee in 2023.3
Like retirees in other MA plans, retirees in an EGWP have access to supplemental benefits such as vision and dental care, and many EGWPs also cover prescription drugs. EGWPs enjoy regulatory flexibilities that allow carriers to customize benefits and provide coverage similar to employee coverage.2 Some employers assist with premiums and co-pays, enabling EGWPs to offer richer benefits. Yet for most enrollees, out-of-pocket costs are lower despite higher utilization.2,4
The Better Medicare Alliance suggests that insurers can strengthen EGWPs by:3,5
- Avoiding changes that will result in payment reductions under the new payment methodology that accounts for the unique geographic attributes of EGWPs
- Encouraging greater provider participation in rural markets
- Working with professional and group associations to allow associations to pool membership for retirement plan participation
- Educating state and local retirement systems, employers and unions on the benefits of EGWPs
- Simplifying the EGWP enrollment process.
MA plans that take these steps can take advantage of a growing market and ensure they are bringing customized coverage and innovative benefits to the highest number of members possible.
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References
1 KFF. 2023 Employer Health Benefits Survey. Oct. 18, 2023. https://www.kff.org/report-section/ehbs-2023-section-11-retiree-health-benefits/
2 Better Medicare Alliance. Employer Retiree Medicare Advantage Health Plans Fact Sheet. January 2021. https://bettermedicarealliance.org/wp-content/uploads/2020/03/Medicare-Advantage-Employer-Retiree-Plans_to-BMA2021.pdf
3 Biniek, J.F, A. Damico and T. Neuman. Spending on Medicare Advantage Quality Bonus Payments Will Reach at Least $12.8 Billion in 2023. KFF. https://www.kff.org/medicare/issue-brief/spending-on-medicare-advantage-quality-bonus-payments-will-reach-at-least-12-8-billion-in-2023/
4 Stengel, K., S. Donthi, R. Yip, K. Brantley and M. Cole. Utilization and Spending by Medicare Beneficiaries in Employer Part D. Avalere. June 1, 2020. https://avalere.com/insights/utilization-and-spending-by-medicare-beneficiaries-in-employer-part-d
5 Better Medicare Alliance. Employer Group Waiver Plans: Current Issues, Evolution & Policy Recommendations. March 2018. https://www.bettermedicarealliance.org/wp-content/uploads/2020/03/BMA_EmployerGroupWaiverPlans_WhitePaper_2018_03_02_FINAL.pdf
