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Survey Finds Increasing Health Costs for Retirees and Continued Erosion of Benefits

Wed, 01/14/2004 - 1:00am — Karen Stevenson
Description: 

In a new survey of some of the largest U.S. employers - conducted prior to passage of the new Medicare prescription drug legislation - 10% say they eliminated subsidized health benefits for future retirees in the past year, while 20% say they are likely to terminate retiree health coverage for future retirees in the next three years. These changes primarily affect new hires, rather than current retirees. The study also finds that 71% of surveyed firms increased retiree contributions to premiums in the past year, and 86% plan to increase such contributions within the next three years. The survey of large, private-sector employers was conducted and analyzed by the Kaiser Family Foundation and Hewitt Associates.

Employers are an important source of health insurance coverage for workers who retire before they are eligible for Medicare ("pre-65 retirees") and for retirees who have Medicare and rely on retiree coverage to fill in Medicare?s gaps ("age 65+ retirees"). For pre-65 retirees, employer-plans are typically the primary and sole source of health insurance coverage, while for age 65+ retirees, employer plans generally supplement Medicare, helping to pay for benefits, such as prescription drugs, that are not currently covered, and assisting with cost-sharing requirements under Medicare.

Other findings include:

* The total cost for employers of providing retiree health benefits to pre-65 and age 65+ retirees and their dependents increased by an estimated 13.7% from $18.1 billion in 2002 to an estimated $20.6 billion in 2003.

* 46% of surveyed firms have placed "caps" (pre-determined limits) on their future financial retiree health obligations while one-third of all surveyed firms offering health benefits to pre-65 retirees and age 65+ retirees have either hit their cap or expect to hit their cap on retiree health obligations within the next one to three years.

* 71% of large-private sector firms surveyed increased retiree contributions to premiums in 2003. Retiree contributions and premiums increased by 20% for pre-65 retirees and by 18% for age 65+ retirees between 2003 and 2003.

* 86% of surveyed firms say they are likely to increase retiree contributions to premiums and 70% expect to increase contributions for dependent coverage, within the next three years.

The 2003 study, the second survey on retiree health coverage conducted by Kaiser and Hewitt, was conducted between June and September 2003 with 408 large private-sector firms (1,000 or more employees) that offer retiree health benefits, including 45% of all Fortune 100 companies and 30% of all Fortune 500 companies.

Complete survey findings are presented in a new report, "Retiree Health Benefits Now and in the Future."

In a new survey of some of the largest U.S. employers - conducted prior to passage of the new Medicare prescription drug legislation - 10% say they eliminated subsidized health benefits for future retirees in the past year, while 20% say they are likely to terminate retiree health coverage for future retirees in the next three years. These changes primarily affect new hires, rather than current retirees. The study also finds that 71% of surveyed firms increased retiree contributions to premiums in the past year, and 86% plan to increase such contributions within the next three years. The survey of large, private-sector employers was conducted and analyzed by the Kaiser Family Foundation and Hewitt Associates.

Employers are an important source of health insurance coverage for workers who retire before they are eligible for Medicare ("pre-65 retirees") and for retirees who have Medicare and rely on retiree coverage to fill in Medicare?s gaps ("age 65+ retirees"). For pre-65 retirees, employer-plans are typically the primary and sole source of health insurance coverage, while for age 65+ retirees, employer plans generally supplement Medicare, helping to pay for benefits, such as prescription drugs, that are not currently covered, and assisting with cost-sharing requirements under Medicare.

Other findings include:

* The total cost for employers of providing retiree health benefits to pre-65 and age 65+ retirees and their dependents increased by an estimated 13.7% from $18.1 billion in 2002 to an estimated $20.6 billion in 2003.

* 46% of surveyed firms have placed "caps" (pre-determined limits) on their future financial retiree health obligations while one-third of all surveyed firms offering health benefits to pre-65 retirees and age 65+ retirees have either hit their cap or expect to hit their cap on retiree health obligations within the next one to three years.

* 71% of large-private sector firms surveyed increased retiree contributions to premiums in 2003. Retiree contributions and premiums increased by 20% for pre-65 retirees and by 18% for age 65+ retirees between 2003 and 2003.

* 86% of surveyed firms say they are likely to increase retiree contributions to premiums and 70% expect to increase contributions for dependent coverage, within the next three years.

The 2003 study, the second survey on retiree health coverage conducted by Kaiser and Hewitt, was conducted between June and September 2003 with 408 large private-sector firms (1,000 or more employees) that offer retiree health benefits, including 45% of all Fortune 100 companies and 30% of all Fortune 500 companies.

Complete survey findings are presented in a new report, "Retiree Health Benefits Now and in the Future."