Data and Research November 21, 2018

Younger Individuals Most Open to Annuities

Forty-two percent of consumers in a LIMRA SRI study said they were open to the idea of annuities, and 61% say having enough money to last through retirement years is their single most important objective for their assets in retirement.

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LIMRA Secure Retirement Institute (LIMRA SRI) research shows that individuals most likely to be interested in annuities are younger and still working.

LIMRA SRI wanted to take a closer look at those who debated buying annuities but decided not to purchase and find out why. Forty-two percent of these consumers were open to the idea of annuities. They feel annuities are good products and would consider purchasing in the future.

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The top reason for not buying annuities for this group was that it wasn’t the right time (44%). Nearly two-thirds of this segment is not retired and only three in 10 of the non-retirees plan to retire in the next 10 years. Also within this group of consumers, 61% say having enough money to last through retirement years is their single most important objective for their assets in retirement.

On the opposite side of the spectrum, 18% of those who didn’t buy an annuity would most likely never own one. They most identified with the statement they do not like annuities and would likely never consider buying one. About half of this group is already retired and one-third plan to retire in the next four years. Another characteristic of this group is they give the highest importance on control over how investments are managed and are more likely to have guaranteed income through their pensions, which is not the case with younger workers.

Defined contribution (DC) plan sponsors have been hesitant to offer annuities as an investment option to participants, mostly for want of a better safe harbor for selecting an annuity provider that would protect them from fiduciary liability. Some also believe the take-up rate by employees would be low.

LIMRA SRI points out that prior research shows retiree annuity owners feel more confident that they are more likely to afford their preferred retirement lifestyles–even if they live to age 90 or older–than retirees who do not own an annuity. Seventy-three percent of retirees who own an annuity believe they will be able to live the retirement lifestyle they want, compared to just 64% of retirees who don’t own annuities. Additionally, 69% of retirees who own an annuity are more confident that their savings and investments will not run out if they live to age 90, compared with 57% of retirees who don’t own an annuity.
Benefits November 21, 2018

Disenrollment From HSA-Eligible Health Plans Increases Employer Health Benefit Costs

Less-healthy enrollees are more likely to disenroll from the HSA-eligible health plans than healthier enrollees, according to an EBRI study.

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Disenrollment from health savings account (HSA)-eligible health plans, which includes a disproportionate number of individuals with health conditions, increases employer spending on health coverage by 2.5% to 3.2%, the Employee Benefit Research Institute (EBRI) found.

The study examines whether disenrollment from HSA-eligible health plans is associated with risk selection, such that once enrolled in an HSA-eligible health plan, less-healthy enrollees are more likely to disenroll from the health plan than healthier enrollees. Overall, 5% of HSA-eligible health plan enrollees in 2013 and 2014 switched to a different type of health plan in 2014 and 2015.

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There is evidence that individuals who disenrolled from HSA-eligible health plans were more likely to have certain health conditions than those who remained enrolled in HSA-eligible health plans. Among individuals with no health conditions, 4.2% disenrolled from the HSA-eligible health plan. Five percent of individuals with dyslipidemia disenrolled, along with 5.3% among those with hypertension or depression, 5.6% among those with diabetes, and 6.1% among individuals with schizophrenia/bipolar disorder.

Individuals with multiple conditions were even more likely to disenroll. Individuals with claims related to childbirth were twice as likely as those with no health conditions to disenroll from HSA-eligible health plans.

EBRI also found use of health care services was a statistically significant predictor of disenrollment from HSA-eligible health plans. However, the magnitude of the impact was quite small. For instance, 4.2% of individuals who used no health care disenrolled from HSA-eligible health plans, whereas 4.4% of those at median use disenrolled, and 5.2% of those at the 90th percentile of use disenrolled.yu

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