Employer-Based Insurance for Retirees Declining, Report Says
Despite a relatively "strong economy" and "several years of relatively low" increases in health insurance premium rates, the decline in employer-based health benefits offered to retirees has continued, and "several indicators" suggest "further erosion" of such benefits, according to a report from the General Accounting Office. GAO researchers examined employer survey data, the 1995 to 2000 Current Population Survey, laws and court decisions to determine the state of retiree health benefits. Further, the GAO interviewed employee benefits consulting firms and several large employers. Most benefit consultants interviewed by the GAO indicated that "retiree health benefits were continuing to decline." Although down from a high of about 70% in the early 1980s, the percentage of retirees with employer-sponsored health coverage has remained stable over the "past several years" -- 37% of early retirees, those ages 55-64, have employer-based coverage and 26% of Medicare-eligible retirees receive employer-based coverage, the report found. The report attributed the stability to employers' tendency to reduce coverage for future retirees instead of for current retirees or to increase retirees' premiums, co-payments and deductibles rather than dropping coverage completely.
The trend of declining employer-sponsored retiree benefits will likely continue, the report found, highlighting several factors, including health premiums that are rising faster than general inflation, a slowdown in economic growth, proposed changes in Medicare and increasing numbers of retirees (GAO report, 5/31). In addition, an April decision by the 3rd U.S. Circuit Court could further reduce the number of employers offering retirees benefits, USA Today reports. The ruling stated that firms offering early retirees different benefits than Medicare-eligible retirees violated the Age Discrimination in Employment Act. According to analysts, the ruling will "likely keep employers nationwide from offering retiree coverage to new hires -- and may cause some to reduce their early retirees' benefits" (USA Today, 5/31). Retirees with reduced or eliminated employer-sponsored health benefits "often face limited or unaffordable alternatives to obtaining coverage" because "retirees' ages and often poorer health status combine to make individually purchased health insurance expensive," the report said. Further, retirees who seek alternative coverage "could receive less comprehensive coverage and pay more for it than they had previously" (GAO report, 5/31). The report, GAO-01-374, is available at the GAO's Web site, http://www.gao.gov, under GAO Reports.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.