As more older workers delay retirement, employers and employees are struggling to manage healthcare costs. Could Medicare be the solution?

By Tricia Blazier

The manufacturing industry knows that its workforce is aging faster than the general U.S. worker population.

The average age of manufacturing workers rose from 40.5 in 2000 to 44.1 in 2018. This is two years older than the overall average age of U.S. workers. Understanding this demographic, it makes sense that nearly 40% of manufacturers are highly concerned about losing valuable technical skills of older workers once they retire.

While older workers tend to be more loyal, which can reduce turnover costs, the downside is that they increase their employer’s healthcare costs. Older individuals have more adverse health conditions – like chronic illness and disease – than younger people, and an employer’s yearly healthcare expenses for a worker over the age of 65 is double the cost of healthcare for a worker under 54.

This isn’t good news, especially since employers and employees already spend substantial amounts of money on healthcare. The Kaiser Family Foundation (KFF) reported that the average healthcare cost for a family is now over $20,000, with deductibles that are double the average from a decade ago and premiums up 5% from last year. As healthcare costs continue to go up, rising faster than wages and inflation, older workers must designate a greater portion of their salaries and bonuses toward healthcare costs, taking away from retirement savings and mortgage payments.

Fortunately, one of the best ways employers and employees can reverse course, reduce healthcare expenses, and improve care, is to help older employers make the switch to Medicare. Transitioning eligible employees from the employer plan to Medicare can lower the employer’s costs and also provide this population of workers the quality of care they need.

Most employees assume their employer’s plan is the least-expensive and highest-quality option. However, only about half of employees believe they understand their employer’s health plan very well. And for many individuals, Medicare can be a better option.

Healthcare Costs Medicare Employers, Industry Today
Healthcare costs rise as we age, transitioning off employer plans and on to Medicare could save employees and employers money.

For starters, it’s typically cheaper. Medicare premiums for Part B start at $144.60 per month, plus most deductibles are under $200 or come at no cost to patients. Then there are other costs to examine: 66% of workers using employer plans must pay a copay for primary care visits. A comparison could show some out-of-pocket costs can be significantly reduced with Medicare. Medicare also offers more healthcare choices and wider coverage than typical employer plans, covering 93% of primary care doctors.

Individuals have several coverage options to choose from under the multiple, customizable plans in the Medicare program, including Medicare Advantage, Medigap and Part D plans. Depending on the type of plan, Medicare allows members the freedom to see a specialist without a referral and provide consistent, transparent rates for treatments and hospital stays. Medicare experts can assist with reviewing plan options, specialists and other provisions in comparison to employer plan options, which may help patients ease the decision when choosing healthcare coverage.

Similar to any major life transition, there can be some complications when switching to Medicare. Like most insurance plans, it can be hard for the average person to figure out all the details. Medicare has several parts, enrollment requirements and timeframes that guide choices, and many options that offer flexibility but can cause more confusion, especially for the average person who doesn’t have a good grasp on their healthcare benefits.

Additionally, no matter which type of plan—Medicare or an employer plan—individuals with more health complications are likely to experience higher healthcare costs than their counterparts with better health. Individuals with poorer health, like those with chronic conditions, may have more out-of-pocket costs than healthier older individuals—but again, this might be easily avoided with expert help in choosing a Medicare plan that matches someone’s needs. So, employees should be aware of the potential cost increases that can result from adverse health and the importance of choosing between and employer plan and Medicare.

Another possible drawback with Medicare, when compared to employer plans, is drug costs. Many individuals may choose to stay on employer coverage when they take a closer look at drugs, specifically specialty drugs. There are two factors. One, Medicare drug plans do not have a maximum out-of-pocket amount for drug costs, whereas some employer plans do. The second is that the beneficiary typically pays a higher coinsurance for specialty drugs on Medicare plans, while employer plans tend to be more affordable for these types of medications.

This area is complicated, however, and every employee will face unique situations, including spouses or dependents who need the company health plan. Many people new to Medicare typically face a very individualized shopping experience to find what will work for their healthcare needs and budget. It’s also important to know that employerSet featured images cannot force employees to transition to Medicare, but rather they can provide this as a voluntary option to reduce costs for older workers. That’s why it’s essential to enlist the help of a Medicare specialists, who can thoroughly explain the benefits of Medicare to employees.

The manufacturing industry is disproportionately affected by America’s aging workforce and its rise in delayed retirement. This is hitting some employers hard, but it doesn’t have to be. Manufacturers faced with this predicament should consider connecting their employees to a Medicare expert to decide if they would benefit from transitioning from an employer-provided plan to Medicare coverage – providing them with better care at lower costs, and cost-saving benefits for the companies where they’ve dedicated their careers.

Tricia Blazier Allsup, Industry Today
Tricia Blazier

Tricia Blazier is the director of Healthcare Insurance Services at Allsup.


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