AUSWR
The Association of U S West Retirees
 

 

 

Future retirees to bear bigger part of health costs
By Will Shanley, Staff Writer
Denver Post
Thursday, December 14, 2006

About 11 percent of large U.S. companies surveyed dropped health benefits for future retirees under age 65 this year, with a nearly equal number considering doing the same in 2007, according to a study released Wednesday.

Current retirees were largely spared from those cuts, the study showed, as just 1 percent of the firms had eliminated benefits for retirees age 65 or older.

Not a single company had stopped providing health coverage for existing retirees not yet eligible for Medicare, according to a survey of 302 large employers by The Henry J. Kaiser Family Foundation and Hewitt Associates.  The survey did not disclose the names of the companies or location.

As for 2007, 2 percent of companies surveyed said they were "very" or "somewhat likely" to end coverage for current retirees.

The survey found that the average cost for firms to provide retirees with health benefits increased from a year ago by 6.8 percent to $68.7 million.

That increase has prompted many companies to ask retirees to pay a larger price, the study showed.  Seventy-four percent of surveyed firms increased contribution requirements for retirees under age 65, while 58 percent increased it for those older than that.

In addition, many companies have also instituted a cap on how much they will pay for retiree coverage, Frank McArdle, a research manager at Hewitt, said during a conference call.

Sixty percent of companies had already hit their self-imposed cap for retirees 65 or younger enrolled in the firms' largest plans, with another 23 percent expecting to reach their cap within the next three years, the study found.

Denver-based Qwest announced in October that starting next year it will require any former management employee or nonunion employee who retired after 1990 to pay future increases in health care costs.

The study did provide retirees with some good news.

Eighty-two percent of the surveyed companies continued to offer drug coverage.  As for next year, 78 percent expected to again offer that perk.

McArdle said that was a modest surprise because some experts had speculated companies would stop covering prescription drugs after the federal government this year launched a Medicare drug benefit.

He added that some companies continued to offer the benefit because of a government subsidy that pays for a portion of a retiree's prescription drug costs.  Another factor is that some union contracts prevent companies from changing medical plans for retirees, he said.

The study is released annually by Washington, D.C.-based Kaiser Family Foundation. The foundation is not affiliated with Kaiser Permanente, the nonprofit managed-care organization based in Oakland, Calif.

Staff writer Will Shanley can be reached at 303-954-1260 or wshanley@denverpost.com.

http://www.denverpost.com/business/ci_4834906