Survey Sees More Erosion in Retirees’ Health Benefits

Retirees are seeing their health benefits erode, and employers are expected to keep cutting back on the medical plans they provide their former workers as costs keep rising, a new study shows.

The cost of providing benefits to retired workers jumped 11% last year to $2,760 per person annually, said Foster Higgins, a New York-based benefits consulting firm. It polled nearly 2,500 employers in the study, which was released Monday.

The sharp rise in costs, coupled with new accounting rules governing retiree benefits, “have forced employers to re-examine their role in providing health insurance for retirees,” said Patricia Wilson, a Foster Higgins principal. “Many have concluded it’s not a role they can afford.”

The Foster Higgins findings show that fewer employers are offering health plans to retirees. In 1992, 46% of employers surveyed provided health benefits to Medicare-eligible retirees, down from 57% five years earlier. Even fewer employers provided benefits to workers who retired before age 65.

President Clinton’s health reform proposal calls for government to pay up to 80% of the premium for early retirees. Because the plan would be phased in over time, “it does little to control present and future retiree health care costs . . . and does not address the unique problems of health needs of seniors,” Wilson said.

Employers who continue to offer coverage are asking retirees to foot more of the bill. Foster Higgins said employers are even more likely to require contributions for dependent coverage. Only 22% of employers surveyed provide free dependent coverage, while 52% share the cost and 25% require the retiree to pay the full cost.

Wilson said employers’ costs are kept high because retirees are reluctant to enroll in cost-saving managed care plans. In addition, she noted that the health care system is not structured to deal with chronic, degenerative diseases characteristic of an older population.