NCPA - National Center for Policy Analysis

Retirees Confront Disappearance of Health Benefits

September 16, 2002

Today's retirees and those who will be leaving the workforce over the next two decades will have to shoulder more and more of the costs of their health plans, according to a new survey by Watson Wyatt Worldwide.

  • Of the 56 retiree health plans reviewed in the study, 17 percent have "virtually eliminated" their liabilities for such benefits by requiring retirees to pay the full premiums.
  • And 20 percent have already eliminated such plans altogether for new hires.
  • Last week, the federal Agency for Healthcare Research and Quality said that the share of private-sector establishments offering health insurance to retirees under age 65 dropped to 12 percent in 2000 from 21.6 percent in 1997.
  • Offerings to retirees who were 65 and older dropped to 10.7 percent from 19.5 percent during the same period.

The Wilson Wyatt survey shows that employers who continue offering retiree health benefits to future retirees and new hires have cut those perks in several ways.

First, they have reduced their share of the premiums, on average, from 80 percent for current retirees to less than 69 percent for future retirees.

Second, many employers are now requiring longer stints at the company to qualify -- with only about one-quarter of the plans offering benefits as of last year to workers retiring with five or fewer years of service, compared with nearly 90 percent as of 1984.

And companies are increasingly tying their share of the premium to the employee's years of service.

Source: Kelly Greene, "Health Benefits for Retirees Continue to Shrink, Study Says," Wall Street Journal, September 16, 2002.

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