GAO: More Retirees Could Have to Buy Private Health Coverage

June 1, 2001 (PLANSPONSOR.com) - The General Accounting Office (GAO) foresees a further decline in employer-sponsored retiree health care, forcing an increasing number of retirees to seek more expensive or unaffordable private insurance.

Retirees will face numerous hurdles in obtaining private health insurance, the GAO wrote in a study called “Employer-Sponsored Benefits May Be Vulnerable to Further Erosion.” 

The GAO reported that the number of retirees with employer-sponsored health coverage has remained relatively stable since 1997, as employers have focused on reducing coverage for future rather than current employees.

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Researchers listed several factors that could prompt a further erosion from the current 37% of early retirees and 26% of Medicare-eligible retirees with health coverage from a former employer.

These are:

  • a resumption of  premiums outpacing inflation
  • an economic slowdown with a softening labor market
  • changes in Medicare coverage (such as adding a prescription drug benefit) that could affect cost and design of employer coverage for Medicare-eligible workers
  • a recent court ruling, allowing claims of violations of federal age discrimination law when employers make distinctions in health benefits they offer retirees on the basis of Medicare eligibility
  • baby boomers leaving the workforce overwhelming employers with the need for expensive retiree health benefits.

The GAO said the decline in the amount of employer-provided coverage has not reversed itself since 1997.

Forcing retirees to find their own coverage puts them in the private insurance market at the worst possible time – when the workers are older and have potentially chronic illnesses. ‘Retirees whose former employers reduce or eliminate health benefits often face limited or unaffordable alternatives to obtaining coverage,’ the GAO writes.

For example, a 60-year-old male in a state where the cost of private health premiums is not capped, could pay four times what a 30-year-old male pays and more if the older worker is sick, the GAO said. Most states do not cap individual premiums.

See also:

Employer-Sponsored Benefits May Be Vulnerable to Further Erosion , the report in PDF format.

Work Changes Require Health Choices. Protect Your Rights , a tip sheet from the Department of Labor for employees nearing retirement.

Lines for Unemployment Claims Grow Longer

May 31, 2001 (PLANSPONSOR.com) - The latest Department of Labor data releases show the lines of people signing up for first time unemployment benefits growing longer by 8,000 for the work-week ending May 26.

The total reached a monthly high of 419,000, after the previous week’s revised total of 411,000. However, the more stable four-week moving average, a better indicator of unemployment, fell to 402,500, from 404,000 in the previous week, the lowest level since April 21.

In an indication that the pace of hiring continues to decline, the number of unemployed continuing to claim benefits came in at 2.85 million last week from 2.76 million the previous week. Continued claims are at the highest level since November 1993.

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The data comes ahead of tomorrow’s release of May’s unemployment rate, a key economic indicator, which analysts polled by Reuters expect to increase to 4.6%


 

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