ARLINGTON, Va.--(BUSINESS WIRE)--Global professional services company Towers Watson (NYSE, NASDAQ:TW) today announced a personalized decision support service that will help early retirees determine whether they are better off using a subsidy from their former employer or taking a tax credit from the federal government. Employer clients of Towers Watson’s OneExchange asked for this capability in order to facilitate moving their early (pre-Medicare) retiree populations to individual market plans.
The service is designed to help early retirees optimize their health insurance spending without “double dipping.” Under the Patient Protection and Affordable Care Act, pre-Medicare retirees can use either a tax-advantaged employer subsidy or a federal tax credit to defray the cost of their health insurance premiums — but not both.
The decision support service will be available to early retirees whose former employers have chosen Towers Watson’s OneExchange to assist them in selecting individual health plans. For employers offering a subsidy, Towers Watson will set up and manage health reimbursement arrangements (HRAs) for each early retiree. Sixty percent of employers transitioning their early retirees to the individual market using OneExchange this fall will offer subsidies through HRAs.
“Early retirees who qualify for both a tax credit and employer funding have a complex decision to make, with serious financial and tax consequences,” said John Barkett, director of health policy affairs with Towers Watson Exchange Solutions. “The OneExchange decision support service is designed to provide them with the information they need up front to lower their health insurance costs without creating tax problems for themselves in the future.”
Added Barkett, “And for the first time, employers can provide funding to their early retirees through an HRA that OneExchange administers — a valued service they’ve been able to provide to their Medicare-eligible retirees for over nine years.”
Benefit Advisors Guide Early Retirees Through the Decision Support Process
Using the decision support service is a simple three-step process for early retirees:
Estimate tax credit eligibility. Early retirees answer questions about household size, location and financial circumstances to estimate their eligibility for federal premium tax credits and cost-sharing reductions available through public health insurance marketplaces.
Compare tax credit to employer subsidy. Early retirees compare their estimated tax credit to their employer subsidy, using a guided process that compares subsidy amounts, qualification requirements, eligible expenses and tax implications.
Choose the optimal subsidy. Armed with accurate information about their options, early retirees can choose which subsidy to pursue. OneExchange can also help early retirees who opt out of their employer subsidy to apply for tax credits through the federal- and state-based health insurance marketplaces, if they are eligible.
This decision support service is available by phone through a OneExchange benefit advisor or online through a guided self-service tool.
For early retirees who don’t qualify for federal subsidies, the decision is simple. For those who qualify for both, the decision is more complex than simply choosing the larger amount, making the expert help offered by OneExchange a key part of the process.
For example, the employer funding amount may be greater than the individual tax credit, but if the early retiree is buying insurance for his or her whole family, the family tax credit may actually lower costs more.
Another example: If the employer funding amount and tax credit are about the same, the early retiree may want to choose the employer funding, which is more flexible than the tax credit, and comes with much less paperwork and fewer tax implications. It’s also possible that if an early retiree underestimates household income, he or she could end up having to pay back some of the tax credit amount to the government.
Purchasing Individual Health Plans Through OneExchange
OneExchange benefit advisors help early retirees compare, select and enroll in individual market plans that are compatible with their chosen subsidy. Early retirees who accept their employers’ funding can purchase individual health plans directly from insurers in their area or from the public insurance marketplace. Early retirees who accept a tax credit must choose plans from the public marketplace in order to receive the credit.
The OneExchange subsidy decision support service will be available during this fall’s annual open enrollment period for plans providing health care coverage for 2015.
About Towers Watson
Towers Watson (NYSE, NASDAQ:TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has more than 14,000 associates around the world and is located on the web at towerswatson.com.