More Than 80% of Large Employers Plan to Raise Retiree Health Costs in Next Three Years, Study Says

In an attempt to head off rising health costs, more than 80% of employers plan to raise premiums or copayments for current retirees in the next three years, and almost one in four employers plan to cut such benefits for future retirees, according to a new study by the Kaiser Family Foundation, the AP/Washington Post reports. Researchers from Kaiser and the consulting firm Hewitt Associates surveyed 435 businesses with more than 1,000 employees in an online poll between July 2 and Sept. 9(Carter, AP/Washington Post, 12/5). The companies, which provide health coverage to a total of 5.4 million retirees, spent $12.5 billion on health benefits for retirees in 2001, and that cost is expected to increase 16%, to $14.5 billion, this year (Kemper, Los Angeles Times, 12/6). According to the survey, 95% of the large employers said they plan to continue to offer benefits to current retirees over the next three years, but 82% said they plan to increase premiums, and 85% plan to increase prescription drug copayments for those beneficiaries. In addition, 22% of employers said they plan to eliminate benefits for future retirees within the next three years (Vandewater, St. Louis Post-Dispatch, 12/5). "Under tough economic conditions, surveyed large employers are doing what they can to provide meaningful retiree health coverage," Frank McArdle, a Hewitt analyst who drafted the study, said. "But they have to balance that objective with the priorities and bottom line of their organization and the cost of providing other employee benefits," he added (MacDonald, Hartford Courant, 12/6). Among the survey's other findings:

• Thirteen percent of large employers said they had eliminated benefits for future retirees in the previous two years.
  
• Seventy-eight percent of employers said they are "likely" to continue offering a prescription drug benefit, even if Congress passes a Medicare drug benefit.
  
• Between 2001 and 2002, retiree contributions on average rose 19% for retirees under age 65 and 20% for retirees over age 65 (Kaiser Family Foundation release, 12/5).
  

Foreshadowing Trouble?
The Los Angeles Times reports that the survey results "foreshado[w] troubling ripple effects and even tougher policy decisions ahead" for lawmakers struggling to address the increasing number of uninsured residents. If fewer employers provide health coverage, Medicare's financial problems will only worsen, according to the Times. The results also indicate possible "financial difficulties" for future retirees (Los Angeles Times, 12/6). "Working men and women cannot count on retiring with the same employer health benefits offered to many in their parents' generation. And finding comparable insurance on their own won't be easy," Kaiser Medicare Policy Project Vice President Tricia Neuman said (AP/Washington Post, 12/6). Randy Johnson, head of human resources strategic initiatives for Motorola, said most of the sureyed companies support reforms to provide drug benefits similar to the benefits provided to employees who retire from the federal government (Los Angeles Times, 12/6). The study is available online Note: You will need Adobe Acrobat Reader to view the report. ABCNews' "World News Tonight" yesterday reported on the study (Judd, "World News Tonight," ABCNews, 12/5). The full segment is available online in RealPlayer Video online. A HealthCast of the briefing to release the report is available online.