News You Can Use: Employers make revamping reitree medical a resolution for 2009

A new survey from ISCEBS and Towers Perrin indicates that employers are considering bold changes in 2009 to rein in retiree medical costs.

With more than 70% of respondents still offering retiree medical benefits to current retirees and some active workers, cost increases -- compounded by the current recession -- are a significant force influencing change in their programs to offload trend risk and begin to distance themselves from plan sponsorship and administration.

For pre-65 retirees, employers continue to wrestle with difficult challenges given the lack of access to affordable individual insurance for this high-cost population. The absence of affordable company-sponsored pre-65 coverage means that many older employees will delay retirement, presenting another significant workforce issue for employers. Although about two-thirds of respondents subsidze between 40% and 80% of plan costs, employers increasing are capping their benefits, with 48% of employers reportung such a cost cap, up from 43% last year.

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 cost-sharing between company and retiree. As part of this shift, a 34% of employers have introduced, or plan to introduce, HSAs to retirees as a means to promote tax free retiree medical savings.

For post-65 retirees, financial pressures on employers and retirees are similar to those for pre-65 retirees. Many employers (60%) who 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.

Click here for extended coverage in the Sept. 1 and November issues of EBN about employers' strategies for retiree medical benefits.