Many Educators Delaying Retirement Due to Concerns about Health Care Coverage

Strategic Insights -

Higher education professionals in the US are growing increasingly concerned about their access to and the costs of retiree health care, leading many to delay their retirement. In response to this issue, Emeriti Retirement Health Solutions has teamed up with Fidelity Investments and Aetna to introduce the Emeriti Program, a first-of-its-kind solution for faculty and staff that combines tax-advantaged investment vehicles with group retiree health insurance plan options that integrate with Medicare. This Program takes a defined contribution approach to pre-funding health care costs associated with retirement, allowing institutions to gain more fiscal control and reduce long-term accounting liabilities.

Key Takeaways:

  • The Emeriti Program is a collaborative effort between Emeriti Retirement Health Solutions, Fidelity Investments, and Aetna to address concerns about retiree health care among higher education professionals.
  • The Program utilizes a defined contribution approach to pre-fund health care costs associated with retirement, allowing institutions to gain more fiscal control and reduce long-term accounting liabilities.
  • The Emeriti Program offers faculty and staff a choice of three health plan options that complement Medicare coverage, including options with enhanced prescription drug benefits and portability across state lines.
  • The Program is designed to provide retirees with flexibility and choice, allowing them to access care anywhere in the United States and its territories, including short-term coverage while traveling abroad.
  • The Program has been joined by 29 private colleges, universities, and higher education-related tax-exempt organizations, with over 200 additional organizations currently pursuing membership.
  • Emeriti Retirement Health Solutions is a consortium of, by, and for colleges, universities, and other higher education-related tax-exempt organizations, leveraging collective buying power, shared resources, and economies of scale to secure well-designed, competitive benefits.
  • The development of the Emeriti Program was made possible by a series of generous grants from the Andrew W. Mellon Foundation.
  • Fidelity Investments provides a menu of mutual fund investment options, extensive recordkeeping functions, and manages disbursements during retirement for health insurance premiums and other qualified out-of-pocket medical expenses.
  • Aetna provides Medicare-eligible participants with a choice of three indemnity-type health benefit plan options that complement traditional Medicare, including options with enhanced prescription drug benefits and portability across state lines.

Statistics:

  • 720 active and retired faculty members at 47 private liberal arts colleges and universities throughout the U.S. participated in a three-year study by Emeriti Retirement Health Solutions, with follow-up interviews conducted with a subset of 231 individuals.
  • The study found that the majority of tenured faculty expressed concern, anxiety, and frustration about the cost of, and access to, retirement medical insurance, with many delaying retirement due to these concerns.
  • The study also found that individuals at institutions with substantial commitments to post-retirement health insurance retired on average 18 to 36 months earlier than peers at institutions with no such health benefit.
  • Fidelity Investments has $2.1 trillion in custodied assets, including managed assets of $1.1 trillion as of April 30, 2005.
  • Aetna has approximately 14.4 million medical members, 12.8 million dental members, 9.0 million pharmacy members, and 14.0 million group insurance members.

Sources:

  • (1) A three-year study by Emeriti Retirement Health Solutions of 720 active and retired faculty members at 47 private liberal arts colleges and universities throughout the U.S.
  • The Andrew W. Mellon Foundation, which funded the research.
  • Emeriti Retirement Health Solutions, a consortium of colleges, universities and other higher education-related tax-exempt organizations.
  • Fidelity Investments, one of the world's largest providers of financial services.
  • Aetna Inc., one of the nation's leading providers of health care, dental, pharmacy, group life, disability and long-term care benefits.