Health Plan Advisors’ Role Is Expanding

General Motors’ decision last month to eliminate retiree health benefits highlights the growing role that outside advisors will play as employers divest themselves of retiree health care obligations

Stepping into the employer’s role as health care advisors are companies like Extend Health, which GM hired last month to help retirees purchase health coverage on their own.

Beginning January 1, salaried GM retirees or their dependents 65 and older will no longer receive health benefits. Like Ford Motor Co. and Chrysler before it, GM will be involved in retirees’ health care via a monthly contribution meant to help cover the cost of health insurance. GM will contribute an additional $300 a month to retirees’ pensions to help defray the cost of health plans that supplement Medicare.

Ford, which dropped group coverage in favor of an annual $1,800 per-employee contribution into a health reimbursement arrangement, also hired Salt Lake City-based Extend Health.The company, which is charging GM a one-time $8 fee per member, advises retirees on finding a health plan that suits their needs and budget.

Extend Health says it can compare the prices of 40 health insurance carriers. The company receives a commission from the health insurance company whose insurance product is chosen by a retiree, but Brian Tenner, senior vice president of sales at Extend Health, says agents provide unbiased advice because they are not told about the value of each plan’s commission.

“It’s truly about being an objective advocate for each one of these participants,” Tenner says.Extend Health will work with GM retirees beginning in mid-October, when carriers announce their prices. GM’s announcement has already sent retirees looking for insurance in the individual health care market.

For 27 years as a parts designer at GM and then in the years since he retired in 1993, Stanley G. Howey never had to worry about the cost of health insurance.

Over the years, premiums increased along with co-pays. But even with a triple bypass this year and a planned hip replacement this fall, the monthly medical bill for Howey and his wife totaled $152—including prescription, dental and eye care.

Having spoken with several health benefits advisors, he expects to pay more than $500 a month, not including dental or hearing coverage.

“I’m 72 years old,” says Howey, who lives in Mount Pleasant, Michigan. “I don’t need this stress in my life.”

One company providing advice to Howey is Washington, D.C.-based Lon¬gevity Alliance, which helps people purchase health coverage and plan their retirement finances.

“One way or another, people are moving from the group market to the individual market,” says chief executive Steve Zaleznick. “People need to work through the decisions they need to make now that they’ve suddenly become the purchaser of the product.”

GM spokeswoman Michelle Bunker says Extend Health will help clear up common misunderstandings. She says GM has received numerous calls from retirees worried that pre-existing medical conditions won’t be covered. Such conditions will be included, she says.

“It’s a huge change,” Bunker says. “We understand that.”

The change and its added cost aren’t a surprise to some.

Gustave Joly, whose wife, Helen, worked as a data processor at the Cadillac division in Detroit for 29 years, says the couple “lost their shirt in the stock market,” first when parts maker Delphi filed for bankruptcy and now with their GM stock at record lows.

Joly, 72, has been speaking with brokers to get a sense of how much his health care costs will increase. He understands that as a retiree, he’s a vulnerable cost target for a company trying to stay afloat.

“They took care of us all this time,” he says. “You can’t just say they’re rotten at the core.”

—Jeremy Smerd