Roots in the Mellon College Retirement Project
Launched by Professors Kenneth E. Cool and Linda Evers Cool, The Mellon College Retirement Project (MCRP) began as an empirical investigation seeking to understand how and if faculty retirement behavior has changed since the expiration, in 1994, of the federal law previously exempting higher education institutions from the Age Discrimination in Employment Act. Until that year, there had been a nearly universal tradition within colleges and universities that faculty members had to retire by or before age seventy.
The fundamental issues uncovered by the MCRP research were:
- A rapidly aging workforce
- Slowing retirement patterns
- Increasing number of later middle-age faculty members in the college-level instructional labor pool
- Spiraling insurance premiums
The research further suggested that retirement rates may be slowing on account of a variety of reasons, including changing attitudes toward retirement age and general wariness about national social insurance programs; but for many, an increasing anxiety about health care insurance was a strong factor for many in making the decision about when, or if, to retire.
So the Mellon College Retirement Project shifted its focus to the health security of retirees.
A number of demographic pressures will influence health care policy choices well into the 21st century, including:
- the increasing longevity of the already old
- the aging of the entire population (particularly as the baby boom generation reaches age 65)
- the advent of new medical technologies which prolong the length and quality of life.
Medicare, as we like to imagine it, is an encompassing safety net that protects all in old age; the reality of Medicare is somewhat less generous. While still a very solid foundation of social insurance for the acute care of citizens aged 65 and older, Medicare does not cover some existing and many emerging areas of health care, nor is it likely that Medicare, in its present form, will be able to keep pace with the increasing rate of health expenditures. Experts estimate that Medicare now accounts, on average, for slightly over 50% of a current retiree's total medical expenditures and that future beneficiaries may be paying more out-of-pocket and, very likely, a higher percentage of their pension income on health care in retirement.
At the same time, the provision of employer-sponsored supplemental health insurance is in decline. During the past decade, the practice of many for-profit employers has been to shift more of the insurance burden onto retirees through rising copayments and deductibles; and in some instances, for-profit companies have eliminated post-retirement coverage altogether for future generations of retirees. Research among non-profit liberal arts colleges suggests similar trends in the cost shifting of retiree health benefits.
The MCRP sought to find possible solutions to these critical policy questions, and began to lean toward the option of consortial pooling of the insurance needs, thinking that there could potentially be strength and security in larger insurance pools than in the dispersed, small populations of individual campuses. It might also give older employees an attractive retirement incentive, provide a more affordable retirement benefit, and allow for a disciplined investment program similar to pension programs to save for future medical needs.
The MCRP brought together experts from a wide range of professional fields to explore potential consortial approaches for providing supplemental health insurance for retiring faculty and staff of national liberal arts colleges, and drew up a plan, based on a defined contribution model and a program of retiree health insurance options based on the foundation of Medicare, to make it happen. This became the Emeriti Program.
After rigorous evaluation, Emeriti selected two nationally prominent providers in the retirement services field to deliver the program's services. Fidelity Investments and Aetna Life Insurance are both strategically aligned with the Emeriti vision of a new paradigm for retiree health benefits, and they have considerable depth of experience in delivering services such as trust administration, investment options, insurance plans, recordkeeping services, and customer support. The Emeriti Program is managed by Emeriti Retirement Health Solutions' national office and delivered by Fidelity and Aetna.
