No stampede out of retiree health plans - study

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Big U.S. businesses will in general maintain retiree health benefits next year despite fears they would be cut to compensate for benefits to the elderly in the new Medicare law, a survey found.

But companies will be asking retirees to pay higher premiums or bigger co-payments or face higher deductibles, according to the survey conducted by the Kaiser Family Foundation in conjunction with Hewitt Associates.

Some health experts had feared businesses could cut back dramatically as the government phases in the changes, including expanding Medicare to cover prescription drugs. Most provisions of the law don’t go into effect until 2006.

“There’s no stampede as of yet,” said Drew Altman, president of the Kaiser Family Foundation. “But I wouldn’t want to take any conclusion to the bank until we have some experience” with the new law.

Research has found that there is a trend among all employers, large and small, toward less job-linked health coverage for older people. Only about one in three people from age 65 now have employer-based health benefits.

“Retiree health coverage is becoming sort of a slowly vanishing species,” Altman said.

But the short-term news about the Medicare law, which includes incentives for businesses to maintain coverage, is good, Altman told a press briefing on the survey. Medicare is the federal health program for people 65 and older.

Fifty-eight percent of the firms responding said they were likely to continue offering drug coverage and take the tax-free subsidy available under the new Medicare law, and 17 percent said they are likely to offer drug coverage to supplement the benefit people will be able to get under Medicare.

Only eight percent said they planned to drop drug coverage.

Eighty-five percent of firms expected they would require retirees to pay a bigger share of their health premiums in 2005, half expected to make them pay a bigger co-payment for medicines, and 43 percent expected to raise deductibles for health care.

The survey was conducted between May and September of 2004. It surveyed 333 large private sector firms with 1,000 or more employees which currently offer retiree health benefits.

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