Firms cutting retiree health benefits

Consulting company calls coverage 'slowly vanishing species'

? Many companies are dropping their promise of health benefits for future retirees, who now might have to stay on the job longer and rely on government health care in their old age.

Eight percent of employers with at least 1,000 workers said they had eliminated subsidized retiree health benefits for some workers this year, and 11 percent more said they probably would do so next year, according to a study released Tuesday by the benefits consulting firm Hewitt Associates and the nonprofit Kaiser Family Foundation.

Most of those affected were newly hired, but some companies said the change applied to workers who had been on the payroll longer.

The number of companies that offer health coverage to retirees has been on the decline for 15 years. But among those that continue to subsidize retiree coverage, the move to treat current and former workers differently reflects a desire to leave health benefits in place for those who already have retired despite several consecutive years of double-digit increases in health care costs.

Since 2000, more than 100 large employers have chosen this path.

Some have cut out subsidies but have told employees they can continue coverage under company health plans after they retire, a much cheaper option than seeking health insurance elsewhere.

“Retiree health care coverage is kind of a slowly vanishing species,” Drew Altman, Kaiser president, said.

The prospect of losing health coverage in retirement is troubling particularly to people who are considering changing jobs or who want to retire between the ages of 55 and 64. Younger retirees can find it difficult to afford health insurance when they can’t get it from their employers.

Medicare, the government health program for older and disabled Americans, kicks in at age 65. Its benefits typically have been less generous than those offered by employers, mainly because the workplace plans cover prescription drugs. Medicare’s drug insurance program begins in 2006.

The employer plans, however, are asking retirees to pay more of their health costs through higher insurance premiums and larger co-pays for doctor visits and prescription medicines.