Employer-sponsored plans receive billions of dollars in federal payments, but they also get something other Medicare Advantage insurers don’t: automatic exemptions to some requirements. (Credit: Centers for Medicare and Medicaid Services)

As a parting gesture to a pandemic-ravaged city, former New York Mayor Bill de Blasio hoped to provide the city with a gift that would keep on giving: new health insurance for 250,000 city retirees partly funded by the federal government. Although he promised better benefits and no change in health care providers, he said the city would save $600 million a year.

Over the past decade, an increasing number of employers have taken a similar deal, using the government’s Medicare Advantage program as an alternative to their existing retiree health plan and traditional Medicare coverage. Employers and insurers negotiate behind closed doors to design a private Medicare Advantage plan available only to retirees from that employer. Then, just as it does for private individuals choosing a Medicare Advantage plan, the federal government pays the insurer a set amount for each person in the plan.

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