NCPA - National Center for Policy Analysis

Retirees' Health Benefits On Wane

May 31, 2001

More employers are reconsidering offering health coverage to workers when they retire, according to a General Accounting Office report. That trend could accelerate in the wake of a decision by the Third U.S. Circuit Court.

The Court ruled in April that firms which give early retirees different benefits from Medicare-eligible retirees violate the Age Discrimination in Employment Act.

  • About 37 percent of early retirees and 26 percent of those over 65 have some kind of health benefit through their former employer.
  • Those numbers are down from the 1980s, when about 70 percent of early retirees had coverage.
  • While it's unusual for an employer to cancel coverage for those already retired, more than 10 percent of employers report having recently increased retirees' out-of-pocket costs for health coverage, experts say.
  • Benefits firm William Mercer reports that 42 percent of large firms in 1999 required early retirees to pay 100 percent of their premium for health coverage, up from 31 percent in 1997.

For many retirees, the cost of their former company's group plan is still cheaper than individual coverage on the open market.

The significance of the Third Circuit's decision is that most employers pay only for insurance that covers what Medicare does not for those over age 65. But they include a richer benefit package for early retirees who don't yet qualify for Medicare.

Now that the court has ruled that to be discriminatory, employers will be forced to suspend that generosity to early retirees if the decision is affirmed.

Source: Julie Appleby, "Health Benefits for Retirees Continue Decline," USA Today, May 31, 2001.

For text


Browse more articles on Health Issues