Employers Reducing, Dropping Retiree Health Coverage
U.S. employers "are increasingly targeting health benefits as a way to save money," a trend that has left many retirees with "thousands of dollars" in additional health care costs, the Los Angeles Times reports. According to the Times, employers began to reduce retiree health benefits in the 1990s because of changes in accounting standards that required more cost disclosure, and in recent years "the benefits are falling victim to rising health care expenses and corporate cost cutting."
Retirees on average account for 29% of health care costs for large employers that offered such benefits, according to Hewitt Associates. In addition, retiree health care costs for large employers that offered such benefits increased by as much as 10.3% from 2004 to 2005, according to a recent survey conducted by Hewitt and the Kaiser Family Foundation.
As a result, many large employers, such as General Motors and AT&T Lucent Technologies, have "scaled back" health benefits for retirees and have considered additional reductions to benefits for future retirees, the Times reports.
Twelve-percent of large employers between 2004 and 2005 said that they will not offer health benefits to future retirees, according to the survey conducted by Hewitt and the Kaiser Family Foundation.
Currently, one in three large employers offers retiree health benefits, compared with two in three in the late 1980s, according to survey conducted by the Kaiser Family Foundation and the Health Research & Educational Trust.
Ralph Craviso, senior director of workforce effectiveness for the human resources department at Yale University, said, "As these costs are shifted, the ability of retirees to access health care will be compromised, and that will result in pressure on the federal government." He added, "Then it will become a national political issue. I believe it is a crisis in waiting."
Rusty Dunn -- a spokesperson for Caterpillar, which recently increased health insurance premiums for retirees -- said, "We're not cutting back. But we are looking at ways under today's realities to share some of the burden." He added, "Failure to make prudent, market-based adjustments would be irresponsible. We feel we would be jeopardizing the competitiveness of the company" (Peterson, Los Angeles Times, 9/26).