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Shrinking Coverage

Fewer Employers Pay for Retirees' Health Benefits

By Albert B. Crenshaw
Washington Post Staff Writer
Wednesday, December 15, 2004; Page E01

Employer-paid health care for retired workers has been growing sharply more expensive, and the number of companies willing to provide it continues to shrink.

Yesterday, a new survey of large private employers found that those still offering retiree health insurance have seen its cost rise 12.7 percent this year alone, a continuation of soaring costs that are driving companies to drop the coverage.

Health insurance for retirees cost firms 12.7 percent more this year than last. (Brynne Shaw For The Washington Post)

Rising Health Costs Retirees are paying more in health insurance premiums ... and will probably shoulder an even larger burden next year.
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Less than a generation ago, about two-thirds of large companies provided health coverage for retirees. Today, only about 36 percent do.

The study, by the Kaiser Family Foundation and Hewitt Associates, a benefits consulting firm, also found that while companies typically pick up the majority of the cost of the insurance, they generally split this year's increase with retirees, causing retirees to see a much larger percentage rise in their own costs.

As a result, the survey found, a typical worker under age 65 who retired in 2004 would pay $2,244 annually in premiums -- $4,644 with spousal coverage -- a 27 percent increase over the cost for a similar worker who retired in 2003.

A typical worker 65 or older, and thus eligible for the government's Medicare health insurance program, would pay $1,212 annually in premiums ($2,508 with spousal coverage) this year -- up 24 percent from last year.

"The prospects for retiree health coverage are slowly disappearing for America's workers, and retirees who have it will be paying more," Kaiser Foundation President Drew E. Altman said in a statement.

The rise for retirees was close to the 12.3 percent increase reported by a similar group of employers earlier this year. But it also means that companies in the new survey expect to pay more than $17 billion in retiree health care costs next year.

The survey did find that most employers that have provided prescription drug coverage in the past are not -- so far, at least -- planning to drop it because of the Medicare drug benefit enacted this year. There had been concern as that measure moved toward passage that it would cause a rush to the exit by private employers.

"Employers are signaling their intent to stay the course, at least in 2006. A large majority are planning to continue offering retiree [drug] coverage, with most of these planning to accept the 28 percent subsidy for Medicare-eligible retirees," said Hewitt's Frank B. McArdle.

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