Benefits June 20, 2003

Medicare Reforms Could Prompt Retiree Health Coverage Exodus

June 20, 2003 (PLANSPONSOR.com) - Lawmakers and others now have a new worry about providing health-care coverage to Americans: namely, that pending Medicare reform may prompt employers to dump their retiree health care policies.
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The Congressional Budget Office estimated that up to 37% of private employers could scrap their retiree policies under versions of Medicare reform circulating in the United States Senate, according to a Reuters news report. Lawmakers are debating whether and how to expand Medicare to cover prescription drugs.

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Senator Bill Frist, (R-Tennessee), the chamber’s Majority Leader, told reporters in Washington that Democrats and Republicans were working together to try to fix the problem. “I’m asking all of our smartest staff people how you do that,” said Frist, according to the Reuters report. “Everybody’s working on it.” Roughly 41 million seniors and disabled people get health coverage through the government-run Medicare health program.

Faced with rising health care costs, more employers are already cutting back on retiree medical benefits — even without the massive new Medicare program, which may offer skimpier benefits than many seniors now get in their retirement packages. Underlying medical costs soared 9.6% last year after a 10% rise in 2001, according to a study released this month by the Center for Studying Health System Change (See Study: Slowing Health Cost Hikes a Silver Lining ).

Private health insurance cover after retirement could drop to 10% of overall health costs by 2031, down from the 50% some employers contribute now, according to Watson Wyatt research. “I’ve heard the concern that employers might be inclined to eliminate their coverage,” Joe Martingale, national strategy leader for health care at Watson Wyatt consultants, told Reuters. “If Congress wants to keep employers, they need to do something to make this benefit fair all around.”

The Senate bill covers half of drug costs up to $4,500 a year and then has a coverage gap until drug costs hit $5,800. Analysts say the bill inadvertently penalizes retirees and companies with good benefits because it does not include company payments on deductibles and co-insurance. This means seniors may struggle to reach the “catastrophic” threshold and could therefore end up paying a lot more out of pocket.

Investing June 19, 2003

Jobless Claims Fall But Still Show Sluggish Market

June 19, 2003 (PLANSPONSOR.com) - Fewer people are being forced to join the queue for those needing first-time jobless benefits, but the number of initial unemployment claims has stubbornly stayed above a recessionary benchmark for more than four months.
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According to the latest US Department of Labor (DoL) data, first-time requests for jobless aid dropped 13,000 to 421,000 for the week ending June 14 from a revised 434,000 the week before. That was the second straight weekly decline (See  Jobless Claims Drop in More Good Job Market News). Further, the four-week moving average – a closely watched indicator because it irons out short-term volatility – fell to 432,000 from 435,000 in the prior week.

The problem: New claims have held above the key 400,000 mark for 18 straight weeks, while the four-week moving average stayed above that level for 16 weeks. Economists view the 400,000 level as a sign of a stagnant job market.

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The number of people continuing to draw weekly benefits fell 62,000 to 3.72 million in the week ended June 7, the latest week for which data was available.

Analysts participating in Reuters’ weekly poll had been expecting 426,000 first-time claims for the week ended June 14 compared with the 430,000 originally reported in the prior week.

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