Health Populi: Employers face a confounding environment for managing retiree health costs

Jane Sarasohn-Kahn in Health Populi blog

The long end-tail of the recession and the rising costs of health care -- both medical trend/clinical and administrative -- are creating uncertainty for employers who cover retiree health benefits. This picture is even more cloudy for pre-retirement benefit plan design.

The bottom line: how do employers balance burdensome health costs with legacy promises?

This question is addressed in Retiree Medical Challenges and Opportunities, December 2009, the fifth annual Towers Perrin-ISCEBS survey.

Among this survey's respondent employers, 80% have laid off workers in this recession, 32% have enacted voluntary staff reductions, and 26% have cut benefits.

Nonetheless, 70% are continuing to provide retiree medical coverage to at least some retirees.

And that's the challenge: how to do "the right thing" while managing costs.

A majority of employers still haven't weaned off retirees from group sponsorship and onto the individual insurance market...yet.

However, look at the chart labeled Exhibit 2: it illustrates the sobering fiscal fact that retirees are paying more than one-half of medical coverage -- on average, $4,140 for a retiree-plus-one for retirees 65 and over, and $7,668 for retirees under 65-plus-one.

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