Companies Retaining Retiree Drug Benefits

Since 12-08-05

From: Waspscpo@aol.com
Sent: Wednesday, December 07, 2005 2:03 PM
To: undisclosed-recipients:
Subject: Survey: Companies Retaining Retiree Drug Benefits

The Washington Post

Survey: Companies Retaining Retiree Drug Benefits

By Albert B. Crenshaw
Washington Post Staff Writer
Wednesday, December 7, 2005


The launch next year of Medicare's new prescription drug program is not prompting companies that offer retiree drug benefits to drop those benefits -- at least in the short run -- but neither does it seem to be slowing the exodus of employers from retiree health insurance overall, according to a new study of the programs and plans of large U.S. corporations.

Under the new Medicare law, employers that offer benefits as good or better than the government's can obtain a subsidy if they continue their own programs. That's what about four in five big employers say they will do next year.

"Most employers are accepting government subsidies and taking a wait-and-see attitude on the drug law," said Drew E. Altman, president of the Kaiser Family Foundation, which along with benefits consultants Hewitt Associates, surveyed 300 large employers.
"The widespread dropping of drug benefits that some had feared has been averted so far as businesses figure out what their longer-term response will be," Altman said in a statement as the study was released this morning.

Still, 9 percent of companies now offering prescription drug benefits to Medicare-eligible retirees said they would stop doing so next year, and another 10 percent said they would provide limited drug coverage to supplement Medicare's.

In addition, the interaction of Medicare and company medical plan rules can create a potential pitfall for retirees, the study said. Retirees themselves have the option of signing up for the new Medicare Part D, but under the rules of about two-thirds of companies, doing so will cause them to lose some or all of the employer-sponsored medical insurance.

At about 29 percent of companies, retirees who sign up for Medicare drug coverage will lose not only their employer's drug coverage but all of their employer-provided medical insurance. At another 31 percent, signing up for Medicare Part D will cause retirees to lose the company's drug coverage.

"For retirees with employer coverage, informed decision-making is especially important," the study said. "Many are concerned that some retirees -- faced with a fairly significant change in their Medicare options -- may sign up for a Medicare prescription drug plan without realizing the potential consequences in terms of forfeiting their employer-sponsored benefits."

Looking past next year, many companies expressed doubt that they would continue to offer drug benefits and accept the subsidy, which amounts to about 28 percent of the employer's costs. For 2007, half said they were very likely to continue to offer coverage and take the subsidy, and another 32 percent they were somewhat likely to do so.

But by 2010, only 20 percent said they were very likely to continue providing prescription drug benefits and taking the subsidy; another 30 percent were somewhat likely to do that. Some 22 percent were very or somewhat likely not to, and the rest did not know.

A goal of the study was to set a baseline by which retiree health insurance can be measured. Some 3.6 retirees and dependents aged 55 to 64 -- too young for Medicare -- now receive health coverage through a former employer or union, and more than 12 million retirees on Medicare use employer-sponsored coverage to fill the gaps in the government program or help with out-of-pocket costs.

However, during the past 25 years there has been a major decline in the willingness of employers to provide such insurance. Between 1988 and 2005, the proportion of companies with 200 or more employees providing health coverage to retirees declined from 66 percent to 33 percent. And the study found that in just the past year 12 percent of the companies surveyed had eliminated retiree health care coverage for new hires.

© 2005 Washingtonpost.Newsweek Interactive
-------------------------------------------------------------------
Contributed,
YNCS Don Harribine, USN(ret)