AT&T move underscores employer shift of retiree health care to insurance exchanges

A growing number of companies are dropping single-employer group insurance plans in favor of privately run insurance exchanges, where a third party sets up a marketplace offering Medicare coverage offered by dozens of carriers, with costs subsidized by their former employers.

The trend was underscored by news this month that AT&T Inc will move its Medicare-eligible retirees in 2015 to an exchange operated by Aon Hewitt, the big employee benefits consulting firm.

AT&T’s move marks one of the biggest shifts of retiree healthcare to an exchange so far, coming on the heels of recent moves by IBM Corp and Time Warner Inc. AT&T has not specified how many retirees will be moved to the exchange, except to say that it will be “much smaller” than the 310,000 retirees at the end of last year who were eligible to receive some kind of benefit from the company.

Thirty percent of companies that provide coverage to Medicare-eligible retirees (age 65 and over) already have moved to exchanges, according to an Aon Hewitt survey of more than 1,230 employers released last month.

For Medicare-eligible retirees, employer benefits are supplemental. Retirees who use traditional fee-for-service Medicare might be offered a Part D (prescription drug) benefit, and a subsidized Medigap plan, which plugs coverage gaps in fee-for-service Medicare. Retirees using Medicare Advantage (all-in-one managed care plans) receive a subsidy toward buying those plans.

The Affordable Care Act (ACA) has enriched Part D benefits, making them more attractive than many employer plans. Moving to exchanges also can help employers avoid the looming risk of the so-called Cadillac tax on rich-benefit insurance plans.

All this change may be unsettling to employees, who will be presented with more complex insurance choices than under the old group insurance system. But advice and guidance are key parts of the exchange services provided by firms like Aon Hewitt.

Learn more in my column today at Reuters Money.