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Employers Shift Retiree Coverage to Medicare Advantage – Center for Retirement Research


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If you retired in 1988 from a job at a large employer with health insurance, you had good odds you would continue to be covered into old age. Two-thirds of large employers that covered their current workers continued to insure them after they retired.

The odds today are not so good: just one in five large employers extends insurance to former employees. Covering retired workers is expensive, and a growing number of companies are unwilling to pay for it.

Among the employers that still do, a development has been afoot that may be limiting the options available to their former workers. The employers and unions that still offer health benefits to retirees are increasingly rolling out Medicare Advantage plans to at least some of their retirees.

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And in about 65 percent of these cases, an Advantage plan was the retirees’ only option last year, up sharply from 44 percent in 2022, according to KFF, a healthcare research organization.

This blog has written often about Medicare Advantage’s surge in popularity among all retirees over the past decade. KFF’s new data on employer health coverage for retirees provides a window into a narrower, but still important, corner of the Medicare market.

Some employers are offering Advantage plans as a lower-cost option so they can preserve an insurance benefit for former employees. But the problem it poses for retirees is that if they don’t want an Advantage plan and instead want coverage through traditional Medicare, they have to be “willing to forfeit their [employer’s] retiree health benefits,” KFF said.

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That’s a lot to give up because the benefits reduce out-of-pocket medical costs. Another issue is that once a retiree enrolls in an Advantage plan, it can be more difficult or even impossible to find a Medigap insurer that will approve them if they want to switch.

In most states, Medigap insurers are required to cover retirees only during the first six months after they initially sign up for Medicare Part B and in a few other special circumstances. After that initial period, the insurer usually has the option of accepting or rejecting an application for coverage. Only a few states, including Connecticut, Massachusetts, Maine, and New York, do more to protect retirees’ right to buy Medigap at any age.

Historically, the employers that extended workers’ health insurance into retirement offered a range of options, including cash subsidies to pay for supplements to Medicare and subsidized Medigap plans. Medicare Advantage is distinct from Medigap, which is a separate policy that supplements a retiree’s traditional federal insurance through the Medicare program.

But Medicare Advantage plans’ market share among all eligible Medicare beneficiaries has doubled over the past decade, to 51 percent today. The plans first came on the scene in 2003 after Congress allowed insurers to provide a retiree’s federal Medicare benefits in a single policy that provides additional coverage for doctor’s appointments, tests, and other services.

Now, Advantage plans are moving into the employer market, reshaping another part of the healthcare landscape for retirees.

Squared Away writer Kim Blanton invites you to follow us @SquaredAwayBC on X, formerly known as Twitter. To stay current on our blog, join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here.  This blog is supported by the Center for Retirement Research at Boston College.





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