Buying health care insurance in the U.S. is confusing, with different insurance carriers, a dizzying array of different types of coverage and a variety of ways that employees paid for a portion of their costs (such as deductibles, copayments, and out-of-pocket maximums). With the rollout of Obamacare, newspapers and blogs are full of discussions about how confusing the choices are and how difficult it is to select a plan.
Well, the truth is that buying health insurance has been confusing for many years, but employers sheltered employees (and, in many cases, retirees) from this confusing mess:
- Employers once provided health insurance to employees, spouses and dependents. They took responsibility to determine benefit plan design from the alphabet soup of HMOs, PPOs, POS plans, and EPOs.
- Insurance carriers were selected.
- Employers also paid for most (if not all) of the cost of the insurance.
- Many employers also provided retiree medical benefits for life to retirees (and spouses).
As employers offer health care to fewer employees and retirees, more Americans are forced to make decisions and deal with this confusing mess.
For a variety of economic reasons, and long before Obamacare, employers have been looking for ways to retreat from providing health insurance to active employees. In addition, since 1990 when accounting rules changed, the retiree medical plan has also been fading. As employers have offered health care to fewer employees and retirees, more Americans are forced to make decisions and deal with this confusing mess. And— make no mistake about it—the health care purchasing process will remain confusing—regardless of what happens to Obamacare.
Interestingly, we have seen this dynamic play out before.
Pensions To 401(k) Plans
Employers used to provide good, old fashioned, traditional pensions. Workers put in 30 years and upon retirement received a regular payment for life. After death, the surviving spouse also received payments for his or her lifetime.
In the 1980s employers started backing away from these pensions. Instead they offered 401(k) plans, which required employees to put in their own money (to get employer matching contributions). Employees had to select their own investments and pay attention to their portfolio.
With the growth of the 401(k) plan we have seen the challenges of explaining complex issues to employees and getting employees to make decisions—important decisions—that affect their financial future.
Over the years we have learned a lot from the transition from pensions to 401(k) plans, and structuring the decision- making process. This is accomplished through providing meaningful information about complex and emotional subjects and offering tools and resources to support employees.
Transitioning to Self-Directed Retiree Health Care
The transition period we’re in now, with fewer employers paying for health benefits for working employees and retirees, is just beginning. For retiree healthcare benefits, it is even going further – employers are looking to shed the obligation altogether and push the retiree out into the retail market on their own.
Retiree Health Choices is addressing this challenge head on with solutions that enable retirees to be better informed and to make better choices in navigating the complex Medicare insurance sector–without employers picking an insurance carrier and defining the coverage to be provided. In coming posts, we will discuss what the lessons from our 401(k) experiences teach us about supporting retirees in buying their health insurance.
About The Author
Allen Steinberg, JD is chief legal officer of Retiree Health Choices. Allen has been a practicing attorney and a consultant specializing in benefit plans for over 30 years, including 25 years as an attorney and partner with Hewitt Associates. Allen has provided employers with advice and support in the design and delivery of their employee benefit plans. He received his J.D. cum laude from Northwestern University Law School.