Most Employers Plan To Retain Drug Benefits
Nearly eight in 10 large U.S. employers expect to continue offering prescription drug coverage to their retirees in 2007 and accept federal subsidies to compensate for their costs, according to an annual survey released Wednesday by the Kaiser Family Foundation and Hewitt Associates, the AP/Houston Chronicle reports (Agovino, AP/Houston Chronicle, 12/13).
The survey, conducted online from June through October, questioned a nonrandom sample of 302 large private-sector businesses that have 1,000 or more employees and offer retiree health benefits. Collectively, the businesses provide prescription drug coverage for 5.2 million retirees and their dependents, including 3.4 million retirees who are eligible for Medicare (Kaiser Family Foundation release, 12/13).
According to study co-author and Hewitt principal Frank McArdle, some experts had expected that companies would eliminate drug coverage for retirees after the Medicare prescription drug benefit took effect last year. The survey found that 82% of companies in 2006 accepted tax-free subsidies offered under the 2003 Medicare drug law to maintain drug coverage for Medicare-eligible retirees and that 78% of companies plan to accept the subsidies next year (AP/Houston Chronicle, 12/13).
Businesses that accepted the subsidy in 2006 reported an average savings of $546 per retiree, according to the survey (Bloomberg/Hartford Courant, 12/14). About 8% of businesses surveyed -- nearly the same group of businesses that eliminated retiree drug coverage in 2006 -- said they will not provide drug coverage for Medicare-eligible retirees in 2007.
The survey also found that 79% of employers who accepted the subsidy in 2006 said it is likely they will offer retiree drug coverage and accept the subsidy in 2008, while 54% of those employers said it is likely they would do the same in 2010 (Kaiser Family Foundation release, 12/13).
Employers reported that total retiree health care costs from 2005 through 2006 increased by 6.8% to nearly $21 billion in 2006, compared with $19.6 billion in 2005 (Carey, CQ HealthBeat, 12/13). Rising retiree health care costs outpaced inflation, which increased by 4% from 2005 through 2006 (Pugh, Miami Herald, 12/14).
The survey found that 74% of businesses increased premiums for retirees younger than age 65 and that 58% of employers raised premiums for retirees eligible for Medicare (Shanley, Denver Post, 12/13). In addition, 34% of businesses increased cost-sharing requirements for retirees younger than age 65, and 24% did so for Medicare-eligible retirees (AP/Houston Chronicle, 12/13).
Businesses reported increasing cost-sharing for "new" retirees -- those who retired on or after Jan. 1, 2006 -- in their largest plan between 2005 and 2006 by an average of 15.1% for those younger than age 65 and by an average of 9.6% for those ages 65 or older, according to the survey (Luhby, Long Island Newsday, 12/14).
The average total premium cost of health coverage for a newly retired worker younger than age 65 was $6,624 for a business' largest plan, of which the retiree paid $2,724. The average annual premium for Medicare-eligible workers who retired in 2006 was $3,240 for the largest plan, of which the retiree paid $1,320, the survey found (Mincer, Dow Jones, 12/13).
The survey also found that 64% of businesses said that in 2007 they will increase retiree contributions by raising the cost of premiums and that 26% said they will increase retiree cost-sharing requirements (Bloomberg/Hartford Courant, 12/14). Twenty percent of businesses said they would increase retirees' drug copayments, and 18% said they will increase retirees' out-of-pocket limits in 2007 (Carey, CQ HealthBeat, 12/13).
Some employers said that they have made efforts to reduce retiree health care costs by reducing the number of employees eligible for benefits upon retirement (Kaiser Family Foundation release, 12/13). Between 2005 and 2006, 11% of employers surveyed eliminated benefits for a group of future early retirees.
In addition, 9% of employers eliminated benefits for a group of future Medicare-eligible retirees (Kaiser Family Foundation release, 12/13). Ten percent of businesses said they are very or somewhat likely to eliminate subsidized coverage for some future retirees in 2007, according to the survey.
About 2% of companies said that next year they likely will eliminate subsidized health benefits for current retirees, the survey found (Long Island Newsday, 12/14). Three in four surveyed firms said that they have not set aside money in the past three years to help cover their anticipated future expenses for retiree health benefits (Dow Jones, 12/13).