shouldering rising health plan costs
Rather than end plans, firms are shifting more costs to
their retirees, a study shows.
Minneapolis Star Tribune
Thursday, December 14, 2006
Mary Ann Neuman
U.S. companies are shifting more of the costs of retiree
health coverage onto their retirees, rather than terminate
the plans amid rising costs, according to the Kaiser/Hewitt
2006 Survey on Retiree Health Benefits, released Wednesday.
Only 1 percent of the companies in the report terminated
their plans for retirees 65 and older. Instead, employers
increased retirees' shares of the premiums, drug co-pays and
other costs, as well as out-of-pocket limits. Some also
capped their own contributions, so that retirees will bear
100 percent of future increases.
Researchers surveyed 300 U.S. companies that have at least
1,000 employees and offer retiree coverage. It's not a
representative sample, but these firms' practices are
considered significant because they tend to have the most
generous benefits and, collectively, they cover more than
one-fourth of the 12 million Medicare beneficiaries who have
retiree health benefits.
Still, only one in four of the companies is putting aside
money now for future obligations, opting instead for a
pay-as-you-go approach -- although accounting changes
starting next year may change that, researchers said.
"Few fully appreciate the value and importance of retiree
health benefits until they or their spouse begins to think
about retiring," said Tricia Neuman, a co-author of the
report. "These are for the most part voluntary, and ...
changes are putting the squeeze on retirees, even those who
are fortunate enough to maintain coverage."
An earlier Kaiser report this year showed that the portion
of U.S. companies offering retiree health benefits has
dropped from 66 percent in 1988 to 35 percent this year.
Rising health costs often are blamed. Wednesday's report
put the 2005-2006 increase at 6.8 percent, on top of 10.3
percent and 12.7 percent in the previous two years,
A 79 percent jump
Mary Ann Neuman of New Hope will see her health premium rise
from $124 a month this year to $222 per month in 2007, a 79
Neuman, 60, retired five years ago as a communications
manager at Qwest. She's one of about 9,000 retirees whose
benefits the Denver-based company has capped.
"This scares the bejeebees out of me," Neuman said. "I'm
frightened as to what the future might hold, and can I
afford it? I have no feeling of security. It's gone."
Qwest spokesman Bob Toevs, in Denver, acknowledged that
moving to a cap was "a difficult decision." "All businesses
are experiencing health care costs rising at an alarming
rate," he said.
Dick Johnson of Blaine was a technician -- a union job -- at
The company still pays his retiree health premiums, but that
can be part of negotiations for a new union contract in
2008, he said.
Now 71, he's nervous.
"You just have to watch what's going on around you ... and
it gives you a bad feeling for what might be coming," he
Wednesday's report, by the Kaiser Family Foundation and
Hewitt Associates consultants, also showed that 3 percent of
companies are introducing to retirees 65 and older
"account-based" plans, also known as consumer-driven health
plans or by their acronyms: HSAs (health savings accounts)
and HRAs (health reimbursement arrangements).
Ford Motor Co. will take that step in 2008, for salaried
retirees 65 and older, Ford spokeswoman Marcey Evans said.
In an additional effort to restrain rising costs, Evans
said, the company will pay each retiree and spouse $1,800
toward an HRA.
H.J. Cummins • 612-673-4671 •