Retiree health costs to keep increasing

? Retirees who’ve been paying more for their steadily eroding health benefits can expect more of the same in the coming year.

A national survey of 302 large private employers found that nearly two out of three will increase premiums for retirees in 2007. Others plan to increase drug co-payments and out-of-pocket costs.

The findings from the annual survey by The Kaiser Family Foundation and Hewitt Associates suggest that the trend of shifting higher health costs to patients isn’t abating.

“Retirees may be able to retain their (private) health coverage in the near future, but they will pay more for it,” said Tricia Neuman, Kaiser foundation vice president and director of its Medicare Policy Project.

In 2006, about three out of four firms raised premiums for retirees younger than age 65, while 58 percent increased premiums for Medicare-eligible retirees age 65 and older. About one in three firms raised cost-sharing requirements for younger retirees, while about one in four did so for those 65 and older.

New retirees, those who stopped working on or after Jan. 1, 2006, paid the highest amount. From 2005 to 2006, firms reported raising contributions for new retirees younger than age 65 an average of 15.1 percent in their largest plans. New retirees 65 and older paid an average of 9.6 percent more for coverage in those plans, according to the survey.

Overall, the average firm paid $68.7 million to provide retiree coverage, a 6.8 percent increase from 2005 to 2006. That’s consistent with cost increases for workers, but still outpaces inflation, which increased only 4 percent during that time.

The rising tide of companies dropping future retiree health benefits also continued in 2006.

Eleven percent of those surveyed eliminated benefits for some future early retirees, while 9 percent dropped coverage for future Medicare-eligible retirees. One in 10 firms reported being very or somewhat likely to cut coverage next year for some future retirees.

The share of companies offering retiree health benefits has fallen from 66 percent in 1988 to 35 percent in 2006.

On a positive note, more than four out of five large employers provided retiree drug coverage paid in part with a federal subsidy. The federal money, designed to provide an alternative to the Medicare prescription drug benefit, helped employers save an average of $546 per retiree. Next year, 78 percent of companies plan to offer coverage to Medicare-eligible retirees, while 8 percent will not.