Benefits December 5, 2002

Survey: Most Employers to Retain Retiree Health Coverage

December 5, 2002 (PLANSPONSOR.com) - While most retirees are expected to keep their employer-provided health coverage over the next 36 months, many retirees will have to pay more for the privilege and still others may get nothing at all, according to a new survey.

Reported by

Fred Schneyer

The survey, by Kaiser Family Foundation’s Medicare Policy Project and Hewitt Associates, found that 95% of employers will keep offering health benefits to current retirees within the next three years.

However, 22% of employers surveyed said they are likely to eliminate health coverage for future retirees within the next three years. Some 13% said they had already dropped benefits for future retirees in the last two years.

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Providing that benefit isn’t cheap. According to the survey, retiree health benefit costs skyrocketed by 16% between 2001 and 2002, while health coverage for current workers increased by 13.7% over the same period.

To help pick up some of those additional costs, 82% of employers said they plan to increase retiree premiums over the next three years, while 85% of those plan to increase prescription drug copayments, according to the survey. Between 2001 and 2002, the average retiree contribution rose 19% for pre-65 retirees and 20% for age 65+ retirees, according to the survey.

“Working men and women cannot count on retiring with the same employer health benefits offered to many in their parents’ generation,” Tricia Neuman, vice president and director of the Kaiser Family Foundation’s Medicare Policy Project, told the Associated Press. “And finding comparable insurance on their own won’t be easy.”

Nearly eight in 10 employers (78%) say they are likely to continue offering prescription drug coverage even if Congress enacts a comprehensive Medicare drug benefit.

For workers who retire before they are eligible for Medicare (“pre-65 retirees”), employer-sponsored plans offer access to health insurance coverage that retirees may otherwise have difficulty obtaining, researchers pointed out. For those ages 65 and older (age 65+ retirees), employer-sponsored health insurance supplements Medicare by helping to pay for benefits, such as prescription drugs, that are not covered under Medicare.

The survey interviewed 435 large private-sector firms – 1,000 or more workers – that currently offer health benefits to retirees. Collectively, the surveyed firms have 7.4 million employees and 3.3 million retirees. The survey was conducted online between July 2, 2002 and September 9, 2002.

For more information, go to theKaiser Family Foundation Web site .