Civilian Health Insurance Options of Military Retirees

The Department of Defense (DoD) provides health benefits to qualified retired service personnel. Active duty personnel who retire with at least 20 years of service are immediately eligible to receive retiree health benefits for themselves, their spouses, and dependent children through TRICARE, the DoD-sponsored health care plan. A substantial majority of retirees have second careers after retirement and have access to civilian health insurance. However, many choose to rely primarily on TRICARE, in large part because of the significant price differential between TRICARE and civilian insurance. In order to understand the implications of this reliance for DoD health care expenditures, DoD asked RAND to explore the available civilian health insurance options of working-age military retirees and the impact of those options on TRICARE utilization. The authors surveyed a random sample of 1,600 military retirees (officers and enlisted personnel) under age 65 who were entitled to TRICARE benefits. This pilot survey was designed to ask about the current employment of the retiree and his or her spouse, participation in a civilian health insurance plan, use of TRICARE for medical care, and the likely effect of premium increases or decreases on participation in civilian heath plans. Key findings showed that although a large majority of retirees have access to civilian health insurance, many choose not to enroll, most frequently citing the cost of premiums. Among those enrolled in civilian plans, many still rely on TRICARE for medical care and prescription drugs, and many would drop their civilian plans if costs rose substantially. As long as DoD premiums are considerably lower than civilian premiums, a shift away from TRICARE use is unlikely. A larger survey, collecting data from retirees and their civilian employers, would be needed for DoD to analyze the effects of benefit design changes to TRICARE on retiree reliance.