With the new changes under the Patient Protection and Affordable Care Act, more employers are considering switching retirees to an exchange-based individual market system, says John Grosso, health care actuary and leader of retiree health care sub-practice at Aon Hewitt, a global human resources solutions provider.

In fact, according to a recent Aon Hewitt survey, six in 10 employers have reconsidered or are now reconsidering their retiree health care strategies and other alternatives. Among the respondents that are open to changes, 63 percent are implementing or weighing a move toward an individual market strategy that would allow them to leverage a health exchange partnership.  Another 65 percent of respondents report that they will consider moving pre-Medicare retirees to an exchange strategy after 2013 – even without a subsidy. 

The changes in PPACA that are prompting more employers to reconsider their retiree health care benefits are both regarding Medicare, Grosso says. One change closes the Medicare Part D doughnut hole for a 10-year period by implementing a new 50 percent pharmaceutical manufacturer discount on brand drugs. Under this rule change, it is expected that the exchange-based individual market system will look similar to plans offered today through the group structure by 2020. The other PPACA change is designed to bring greater efficiency to Medicare Advantage by changing the way the plans are reimbursed. The intent of this change is to cause the more efficient plans to rise to the top while the weaker plans disappear or consolidate into other plans.

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