Employers Paying Less, Reducing Retiree Health Insurance Coverage
Employers are paying less and less of retirees' health insurance costs, and many companies have eliminated plans for retirees altogether, according to a study to be released today, the Wall Street Journal reports. As part of the study, Watson Wyatt Worldwide, a human resources consulting firm, examined retiree health plans of 56 companies with at least 5,000 active employees. The study found 17% of employers have "virtually eliminated" their financial obligation for health coverage by requiring retirees to pay all of their premiums, and 20% of employers have cut retiree health insurance altogether for new workers (Greene, Wall Street Journal, 9/16). Based on some policies already implemented, the survey predicts employers will pay less than 10% of retiree health costs by 2031 (Strope, AP/Philadelphia Inquirer, 9/16). The study also found:
- Employers are reducing their share of premium costs, from about 80% of current retirees' health premiums to an expected 60% of future retirees' premiums.
- Only 25% of employers offer a health plan to workers who retire after less than five years of company service, compared to 90% of employers who offered a retiree health plan to such workers in 1984.
- One-quarter of employers cap their premium contributions for current retirees, compared to 39% of employers who have capped retiree contributions for current employees and 45% of employers who plan to cap retiree contributions for new hires.
- More employers are planning to offer retiree medical accounts, in which companies credit workers a fixed dollar amount for each year they are in the plan; only 2% of employers surveyed offered such accounts, but 13% plan to offer retiree medical accounts to new hires (Wall Street Journal, 9/16).