According to a press release, the survey finds that
pre-65 retirees, who are not yet eligible for Medicare, will be hardest hit as
they attempt to balance fixed incomes with steady increases in health coverage
costs. At the same time, the survey also reveals that many employers are
missing significant opportunities to deliver retiree benefit value while saving
money and improving program effectiveness.
Among surveyed employers, the total annual cost for
pre-65 retiree health coverage has increased 6%, to $7,596 for a single retiree
in 2010, compared to $5,184 for a single active employee. The 2010 cost for
family coverage (for the increasing group of retirees that still have dependent
children) is $19,596 — nearly 31% more than comparable costs for family
coverage for active employees.
In plans that offer an employer subsidy (many do not),
the subsidy covers less than half of the total cost, on average, and typically
does not increase to keep up with inflation. The annual cost share pre-65
retirees pay to cover themselves is $3,984. Their share to cover themselves
plus one dependent is $7,668, and $10,548 for themselves plus family. These
costs are roughly three times higher than the cost share their active employee
counterparts pay for similar coverage, the press release said.
In addition, pre-65 retirees are paying more toward their
ongoing health care expenses due to cutbacks in benefit designs.
For post-65 retirees, the cost of individual plans will
increase an average of 4%, to $3,840, while the cost of plans covering a
retiree plus one dependent will increase to $7,848. While the relatively low
increase is good news, it masks the fact that a number of employers have eliminated
prescription drug coverage or substantially reduced benefits to keep cost
increases in check, Towers Perrin said. These costs are, on average, double
what these retirees would pay as active employees.
The Towers Perrin Retiree Health Care Cost Survey found
that, among survey respondents, only 22% of companies offer some sort of
subsidized retiree coverage to new hires. Another 23% offer retirees access to
a company-sponsored plan, but require participants to pay the full cost (no
employer subsidy). The picture is only somewhat better for current retirees and
those employees already part of the company workforce — 45% of their employers
provide subsidized coverage for all or some of these current and retired
workers, and an additional 14% provide access-only benefits.
Towers Perrin suggests health savings accounts (HSAs)
represent a tax-effective way for active employees to save for retiree medical
costs and for pre-65 retirees to pay medical expenses more tax-effectively.
However, the survey found only 52% of survey respondents offer employees the
opportunity to participate in an HSA-qualified medical plan. The firm also
suggested accessing the external marketplace for insurance products tailored to
Medicare beneficiaries to increase the total dollars available to retirees due
to higher levels of government funding and improved plan choice. The survey
found 65% of employers have not taken advantage of this option.
The company pointed out another underutilized solution, a
retiree medical savings account (RMSA), which allows employees to accumulate
unused health care dollars provided in active employee plans through a health
reimbursement account (HRA). Only 9% of survey respondents sponsor such
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