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Retirees Likely To Feel Benefits Crunch

Faced with escalating health costs, more than half of employers plan to raise premiums and increase co-payments for retirees over the next three years, and nearly a quarter say they are likely to eliminate health coverage for future retirees, a new survey shows.

"This study is the latest bad news for American workers on the health care front," said Drew Altman, president of the Kaiser Family Foundation, which conducted the survey along with the consulting firm Hewitt Associates. "Current retirees are being asked to pay more for their health coverage and current workers are less likely to get health benefits from their employer when they retire."

The survey interviewed 435 large private-sector firms — those with 1,000 or more workers — that currently offer health benefits to retirees. Collectively, the surveyed firms have 7.4 million employees and 3.3 million retirees. The survey was conducted online between July 2, 2002 and Sept. 9, 2002.

The survey offers a glimpse of the dilemma companies face in providing benefits for retirees, who are likely to have more health issues than younger people. For instance, between 2001 and 2002, the surveyed employers saw the total cost of providing retiree benefits increase by an average 16 percent. The cost of providing health benefits to active workers during the same period rose 13.7 percent.

Among those surveyed, 82 percent of employers said they plan to increase retiree premiums over the next three years. Eighty-five percent of those plan to increase prescription drug co-payments.

The majority of employers, 95 percent, said they will continue offering health insurance to current retirees in the next three years. But future retirees may face an uncertainty.

Twenty-two percent of employers surveyed said they are likely to eliminate health coverage for future retirees within the next three years. Thirteen percent said they had already terminated benefits for future retirees in the last two years.

"Working men and women cannot count on retiring with the same employer health benefits offered to many in their parents' generation," said Tricia Neuman, vice president and director of the Kaiser Family Foundation's Medicare Policy Project. "And finding comparable insurance on their own won't be easy."

A recent Institute of Medicine report warned that the nation was on the verge of a crisis as private health insurance costs are increasing at a rate of more than 12 percent a year. Individuals are paying more of out pocket and receiving fewer benefits, the report noted. It also pointed out that already one in seven Americans are without health insurance, with the number of uninsured rising.

By Janelle Carter