The Early Retiree Reinsurance Program seemed like a step forward in helping Americans figure out how to cover the costs of healthcare in retirement. But findings from a new Employee Benefit Research Institute study suggest that the program still leaves a lot of work for advisors to do.
The ERRP sets out to help employers provide health insurance to retirees 55 years or older, who are not yet eligible for Medicare. Created by the Affordable Care Act, the program dedicates $5 billion to employers to extend affordable healthcare to early retirees, their spouses, surviving spouses and dependents.How many employers in the U.S. already extend that benefit? In one of its so-called FastFact dispatches, EBRI says that 444,150 private-sector establishments offer health benefits to early retirees, or about 11.2 percent of the total. Among large employers, which are those with 1,000 workers or more, 34.5% offer health benefits to early retirees. For companies with fewer than 10 workers, which accounts for 3.7 million establishments, the number is tiny, at 1.2%.
The federal government has accepted 2,000 employers into the Early Retiree Reinsurance Program. The money, however, will likely be exhausted in two years. “That still means that someone is not benefiting from it,” said Paul Fronstin, director of health research and education programs at EBRI.
The benefit may not be extended to new hires, companies might make it harder for employees to qualify, and they might cut back on benefits. Aside from that, a lot of the program benefits could end up benefiting unionized workers or those in lower-paying positions, and sidestepping more affluent and high-net-worth clients, who are more likely to retain financial advisors.
“There is a huge opportunity here for financial planners to engage with people on healthcare,” Fronstin said. Clients may not have given a whole lot of thought to having sufficient amounts of money set aside to cover health expenses in retirement, but advisors can help change that. One way to begin is to let clients know that Medicare often covers only between 50% and 60% of medical expenses. The public, said Fronstin, needs to be more informed about that fact.