Pre-65 Retirees Vexing Part of Retiree Health Issue

December 22, 2009 ( – As employers continue to evaluate retiree health benefits, a new study finds the most vexing part of the issue is what to do with coverage for pre-65 retirees.

A news release about the joint study between Towers Perrin and the International Society of Certified Employee Benefit Specialists (ISCEBS) says the critical issue is that there continues to be a lack of affordable coverage before retirees hit age 65. That translates into more delayed employee retirements, which, in turn, presents employers with a host of other workforce management issues, the news release asserts.

The 45% of employers who subsidize pre-65 coverage but limit their subsidy to a fixed dollar maximum, are feeling pressure, as costs rise above the caps and employees are exposed to high and rapidly rising premium cost-sharing. Retirees typically must pay the full excess cost.

The survey finds increasing employer anxiety about the situation. In general, according to the announcement, plan sponsors are looking for clarity about the right way to recast their agreement with employees and retirees to achieve broader workforce management objectives

“Employers have a good understanding of their retiree medical problems, and a wish-list about the general features of an attractive solution. Specifically, they want retirees to have access to high-quality commercial insurance products and they want an outsourcing partner to handle administration,” says C. Scott Boring, ISCEBS president and vice president of Lockton Insurance Brokers LLC.

Nearly 70% of survey respondents indicate that they continue to provide retiree medical coverage to some or all retirees, and about 80% of retiree medical plan sponsors pay some portion of the cost of plan coverage. Even extending future retiree medical coverage to new hires is a reality for 40% of the survey’s respondents, the news release said.

On the other hand, employers have more alternatives for post-65 retirees, whose employer coverage is secondary to Medicare, due to a rich variety of affordable individual insurance products, the news release said.

The survey drew responses from 155 organizations.

The survey report for Retiree Medical Challenges and Opportunities is here.