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Exchanges are being used to provide 'defined contribution' nongroup coverage
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The share of employers sponsoring retiree health coverage has declined and employers that continue to offer coverage are redesigning their plans in response to rising health care costs and the Affordable Care Act, according to a new report by the nonprofit Kaiser Family Foundation,
Retiree Health Benefits at the Crossroads.
The share of large firms (200 or more workers) in the U.S. offering retiree health benefits to active workers has declined from 66 percent in 1988 to 28 percent in 2013. The largest firms are most likely to offer health benefits to active workers when they retire; 48 percent of organizations with 5,000 or more workers provide retiree coverage versus 5 percent among those with from 3 to 199 workers.
Premiums and Cost Sharing
Typically retirees are required to make a contribution toward the total premium, and in some instances retirees pay 100 percent of the cost. According to Mercer’s National Survey of Employer-Sponsored Health Plans, as cited in the Kaiser report:
Ongoing concerns about costs coupled with changes in Medicare, notably the addition of prescription drug coverage and more recent changes made by the Affordable Care Act (ACA), have triggered a major reassessment by employers of whether, and in what form, they should continue to offer retiree health benefits. Further, a number of policy proposals are under consideration that could have a significant impact on retiree health benefits and costs.
In general, most employers do not appear to be dropping coverage altogether, but the prevalence of retiree health coverage is expected to decline incrementally over time, assuming employers follow through on their interest in dropping coverage.
In addition to outright terminations of coverage, key changes reported by employers include:
Over the next few decades, these trends suggest that employer-sponsored supplemental coverage is likely to be available to far fewer workers, be structured differently and play a smaller role in retirement security than it has in the past.
Stephen Miller, CEBS, is an online editor/manager for SHRM.Related External Report:
Market trends in retiree healthcare and financial reporting implications, PricewaterhouseCoopers, April 2014
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