Future retirees to bear bigger
part of health costs
By Will Shanley, Staff Writer
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
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
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
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
Staff writer Will Shanley
can be reached at 303-954-1260 or