NCPA - National Center for Policy Analysis

CHIPPING AWAY AT RETIREE HEALTH BENEFITS

September 27, 2006

Employers are increasingly targeting health benefits as a way to save money, saddling older people with costs that companies used to accept as a routine part of business, says Jonathan Peterson in the Los Angeles Times.

Retirees are being hit particularly hard because of their large share of health care costs:

  • On average, retirees account for 29 percent of the corporate medical bill for large employers that offer such benefits, according to Hewitt Associates, a benefits consulting firm.
  • In addition, retiree health care costs for large employers increased 10.3 percent from 2004 to 2005, according to a survey of large private employers by the Kaiser Family Foundation and Hewitt.

As a result, many employers have scaled back health benefits for future retirees:

  • Between 2004 and 2005, 12 percent of large firms said such benefits would be unavailable for future retirees.
  • Currently, only one in three large employers offers retiree health benefits, compared with two in three in the late 1980s.

Over time, says Peterson, growing legions of the elderly will find themselves with thousands of dollars in additional costs -- posing difficult personal choices over care and new pressures on a federal government that already faces a vast, uncovered liability for the old-age needs of the baby boom generation.

Source: Jonathan Peterson, "Employers Chip Away at Retiree Health Benefits," Los Angeles Times, September 26, 2006.

 

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