By George Tavares
Retiree Group Health Coverage is growing in popularity locally, particularly amongst the larger and more profitable Companies- . Several factors have contributed to this trend – the major ones being as follows: –
Employers see their moral responsibility to Employees extending beyond retirement fostered by Pension Plan Benefits, which maintain the mutual interest of both Employees and Employers-
The high cost of medical treatment for the aged when major treatment is more probable and less affordable.
The new social wage policy of Trade Unions
Employees in a good Health Plan would have accrued claim patterns and habits and grown to be dependent on these benefits
INSURANCE COVERAGE (PROTECTION):
Insurance may be extended under the Terms and Conditions of any Insured Plans. If the Plan is Self-Funded, insurance protection may not be available. Alternatively, or in conjunction, adequate reserves should be established.
In some cases Insurance Coverage may be limited to a maximum age. (Usually 75)
FUNDING THE BENEFIT:
Because of the foregoing and in particular the fact that larger claims can occur more frequently for retirees, cost and funding burdens are placed on the respective Plans, Employers and Insurers, if any. Therefore the provision of Retiree Group Health Coverage should not be considered unless the cost and funding factors are addressed simultaneously. Experience has shown that in many such cases where this point has been ignored, there have been detrimental effects.
At peak, Retiree claims could account for 20%-35% of the claims paid in a plan year. In contrast, Retiree Premiums would represent 5%-15% of overall premiums, effectively resulting in a subsidized program.
The most cost effective funding method is one that provides for early funding akin to Pension Plan Funding. Here are two such options:
Option I (Advance & Retiree Premium Funding)
Establish a Premium/Claim Reserve Fund from additional monthly
On Retirement – Non- contributory Premiums will be deducted from
Option II (Contingency Reserve and Retiree Premium Funding)
On commencement of the program, immediately establish a
In lieu of an immediate Contingency Reserve, the above should be
On Retirement – Non- contributory Premiums will be deducted from Indicative Retiree Premiums:
Retirees’ premiums are usually 100%-150% of active Premium cost.
A Retiree Health Program, like Pensions is a long-term commitment and therefore its design, funding, implementation and administration should be professionally done.
Accordingly, it would be most prudent to seek the assistance of an Employee Benefits Insurance Broker or other related professional when considering its establishment.