PPACA Starting to Impact Retiree Health Plans

In the retiree benefits world, there is a general consensus that several provisions in the Patient Protection and Access to Care Act (PPACA) may cause employer sponsors of retiree health plans to rethink those programs. These changes include:

– Filling of the Part D “doughnut hole” (2010-2020)

– Guarantee issue insurance with no pre-existing condition exclusions (2014)

– Health insurance exchanges (2014)

These reforms, along with others, will potentially make it less expensive for a retiree to get coverage on the “open market” rather than through their employer-sponsored program. This could be especially true if the retiree only has access to the employer plan and is paying the full premium for coverage.

As reported in the Minneapolis StarTribune recently, 3M is one of the first large employers to disclose that they plan to end their retiree health plan because they feel retirees will likely be able to get better coverage for a lower price under the PPACA reforms. Whether this is a bellwether remains to be seen.

However, the decision to end a retiree health program in anticipation of the full effect of health care reform raises some important issues:

– For retirees who have been on the employer plan for many years, how are they being prepared to “go into the market” and select health insurance?

– If the PPACA provisions are modified or repealed before they fully go into effect, how will this change the insurance options (and costs) for retirees whose employers have decided to eliminate their retiree health plans?

– Would an employer consider reinstating their retiree health plan if PPACA is repealed?