Employers Shift Health Care Burden to Employees, Jeopardize Retirement Plans

Financial advisors Bofford and Flower tell pre-retirees what they need to know about changes to employer-based health insurance plans and retirement savings needs

PR Newswire

FAIRFIELD, N.J., Aug. 14, 2014 /PRNewswire-iReach/ -- Employer-based healthcare plans are in a state of flux as large and small businesses assess a host of requirements and plan options following this year's implementation of the Affordable Care Act (ACA). Since health care costs in retirement have long been considered a major source of financial stress, changes to coverage are having an inevitable impact on how Americans tackle retirement planning, according to Mike Flower and Brad Bofford, Managing Partners of Financial Principles, LLC in Fairfield, NJ.

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"Until recently, most of the focus of the ACA has been on coverage for the previously uninsured or of those covered through individual health plans," said Bofford. "But the conversation is beginning to switch towards the impact the insurance exchanges are having on employer-based group plans."

According to a report by PricewaterhouseCoopers' Health Research Institute (HRI), more than 156 million Americans receive health insurance through the workforce today. "Full-time and part-time employees, as well as small business owners and early retirees with employer coverage need to tune into what is happening with their health insurance or run the risk of being unprepared during retirement years," warns Flower.


According to the Kaiser Family Foundation, various large federal and private surveys are currently collecting data to help assess the effectiveness and impact of such sweeping reforms on employer-based insurance. While the information needed to adequately understand enrollment and coverage changes will not be available for some time, Bofford and Flower have anecdotal evidence from clients that shine a light on such changes and their inevitable consequences on long-term retirement planning.

"I've worked recently with several small businesses that have switched their healthcare coverage this year from group pricing to individual pricing," explains Flower. "Traditionally, employees would choose from price-fixed categories such as: married with children, married couple, single parent with children, and single person. By moving to individual pricing, coverage is based upon the age of the employee, spouse and each child – maxing out at three children."

"I find it surprising the amount of time and effort now going into the administration of these plans on the front end in the collection of data, as well as the back end after enrollment, because every employee is paying a different price," said Bofford.

Flower also indicated that some client's insurance companies are moving employees out of the top-of-the-line 'Cadillac' plans by increasing premiums, forcing employers to accept lesser service plans for the same price as what was paid for the Cadillac just two years ago. Increased deductibles, higher co-pays and more restricted pharmacy benefits are just a few examples of how these changes to employer-base plans are shifting more and more costs to employees.

There is only so much money employers have to spend on total employee benefit packages. As health care costs continue a steady rise companies shift more of the cost sharing on to their employers, forcing them to allocate more of their own money towards health and less on other savings such as retirement vehicles, explains Flower.

In my opinion, we are not experiencing a revolutionary impact from the ACA, but rather an evolution," says Flower. "Changes will be rolling out for years to come but one thing is for sure, the market trend appears to be moving toward more consumer responsibility and less employer control."


The Financial Principles partners suggest the following to help today's employee plan for retirement:

1.     Start asking questions of your employer and the company's plan manager.

a.     Will there be bigger paycheck deductions for employee and/or dependent coverage?

b.     Are there plans to move employees into a private insurance exchange?

c.     If so, will it be within a defined contribution framework?

d.     Will part-time workers continue to receive coverage?

2.     Consider choosing a high deductible health plan with an HSA if your company offers that option.

3.     Depending upon the level of changes to your employer-sponsored plan, it may be worthwhile to research opportunities now available on the federal or state exchanges. The Kaiser Family Foundation offers a helpful calculator that gives you an idea of how much insurance could cost you in the marketplace.

4.     Don't put your retirement plan at risk. While it's tempting to reallocate money otherwise put into retirement accounts such as a 401(k) or an IRA to pay for increasing healthcare costs, don't do it. Look for other ways to cut back on spending and keep saving to ensure you have enough money to last through your entire retirement years.

5.     Work with an independent financial advisor to sort through the myriad of changes, choices and considerations in order to make informed decisions that are right for you and your retirement plan.

About Financial Principles, LLC

Financial Principles understands the importance of planning – whether it's for retirement, saving for college or protecting personal estates and legacy plans. The firm's Managing Partners, Bradley H. Bofford, CLU, ChFC, CFP® and Michael A. Flower, CFP® bring a combined 40+ years of financial services experience to their clientele. Learn more at www.financialprinciples.com.


Securities offered through Securities America, Inc. Member FINRA/SIPC. Bradley H. Bofford, CLU, ChFC, CFP® and Michael A. Flower, CFP® are Registered Representatives. Advisory services offered through Securities America Advisors, Inc. Bradley H. Bofford and Michael A. Flower are Investment Advisor Representatives. Financial Principles, LLC and Securities America, Inc. are not affiliated.

Written by Brad Bofford and Mike Flower, Securities America, Inc. Registered Representatives, in conjunction with Impact Communications.

The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan.

Media Contact: Karen Embry, Impact Communications, 913-649-5009, karenembry@impactcommunications.org

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