Survey: Employers Look for More Changes in Retiree Medical Benefits

The International Society of Certified Employee Benefit Specialists has released a survey about providing medical benefits for pre-65 and post-65 retirees that finds that employers are struggling to balance conflicting objectives in responding to organizational cost pressures, rapidly rising retiree contributions, administrative challenges, and the transition of older workers into retirement. "In the absence of a panacea, employers are examining ways in which current market offerings can be designed and deployed to help 'change the deal' with employees and retirees without undermining workforce management initiatives or inciting undue employee or retiree unrest."

Conducted with Towers Perrin, the survey--"Employers Are Poised To Take Action On Retiree Medical Plans"--reports that while the long-term trend toward employer exit is clear, with only 39% of employers offering retiree medical to new hires, over 70% of respondents still offer retiree medical to current retirees and some portion of their current active population. While only 7% of employers have ceased financial support for pre-65 coverage in the past two years, 42% have either changed or plan to change the cost-sharing deal between company and retiree. For post-65 retirees, 60% have capped their subsidy report plan costs in excess of the cap, almost 40% have or will recast cost-sharing terms with post-65 retirees, and almost 20% have ceased--or plan to cease--providing any post-65 financial support at all.

Source: International Society of Certified Employee Benefit Specialists Press Release (December 18, 2008)

EEOC Rules that ADEA Is No Barrier to Employers Coordinating Health Plans with Medicare

The U.S. Equal Employment Opportunity Commission (EEOC) has published a final rule allowing employers that provide retiree health benefits to continue the longstanding practice of coordinating those benefits with Medicare (or comparable state health benefits) without violating the Age Discrimination in Employment Act (ADEA).

Following a period of litigation arising from a 2000 federal circuit court decision that the ADEA requires that the health insurance benefits received by Medicare-eligible retirees be the same, or cost the employer the same, as the health insurance benefits received by younger retirees, the regulation now provides an exemption for ADEA coverage for the common and longstanding employer practice of "coordinating" those benefits with Medicare by supplementing the government healthcare or by offering retirees a "bridge" benefit to cover health expenses after employees retire until they become Medicare-eligible.

“Implementation of this rule is welcome news for America’s retirees, whether young or old,” said Commission Chair Naomi C. Earp. “By this action, the EEOC seeks to preserve and protect employer-provided retiree health benefits which are increasingly less available and less generous. Millions of retirees rely on their former employer to provide health benefits, and this rule will help employers continue to voluntarily provide and maintain these critically important benefits in accordance with the law.”

Source: Equal Employment Opportunity Commission Press Release (December 26, 2007)

Other Sources: Des Moines Register "Don't make it harder to give health benefits to retirees" (January 2, 2008); AARP News Release (December 27, 2007)

Canadian Surveys Show that Attention to Health Policies Can Keep Older Workers on the Job

Derek Sankey, writing for CanWest News Service, picks up on two recent surveys to point out that "tweaking health-care benefit plans could help retain experienced workers for longer, yet most companies plan to reduce those benefits in coming years."

The first survey--the "The sanofi-aventis Healthcare Survey 2007"--reports that about two-thirds of workers aged 55 or older are "very likely" or "somewhat likely" to continue working or return to the workforce after retirement if their employers would offer health benefits that continue into retirement. However, the second survey--conducted by Hewitt Associates--shows taht 57% of organizations plan to reduce post-retirement health-care benefits over the next three years.

However, according to Cathy Course, a senior benefits consultant for Hewitt Associates in Calgary, emerging trends in health-care benefit plans would suggest taht there are ways to combat the increasing costs associated with such a large of number of workers exiting the workforce and wanting extended health benefits, with flexibility being a core concept.

Source: Saskatoon Star Phoenix "Health benefits worker-retention issue" (August 18, 2007)

Corporate Retiree Health Benefits Continue To Be Scaled Back

Sylvester J. Schieber, director of U.S. benefits consulting at Watson Wyatt Worldwide, writes that the combination of rising health care costs and Medicare coverage means that retiree benefits, as we know them, are disappearing.

As Medicare begins to cover prescription drugs in 2006, the biggest gap in medical benefits for most retirees will be filled. For those 65 and older, coverage from their former employer may no longer be necessary. The large-scale trend away from employer-provided retiree medical benefits not only will continue; it's likely to accelerate.

While the bottom line is that U.S. companies that finance retiree medical benefits are at a competitive disadvantage compared to other companies in their industry that do not offer the benefits so that, over the long term, the inability to compete on costs may inevitably threaten the viability of any company that provides rich retiree health benefits, there is still a need for insurance coverage by those who retire before age 65. "Our challenge is to develop alternate approaches for workers to accumulate assets to cover their insurance and out-of-pocket health costs during retirement, but to do so in affordable and sustainable ways that allow U.S. companies to compete and continue to serve the needs of future retirees."

Source: "Retiree medical benefits-past, present and future" Employee Benefit News (March 2006)