- The Washington Times - Monday, September 16, 2002

Future retirees should expect to cover substantially more, if not all, of the costs of their health care as employers increasingly reduce retirement medical benefits.
Few workers today are getting ready for this significant change and may have to consider putting off retirement, says an author of a new study on the issue.
By 2031, companies are expected to pay less than 10 percent of total medical expenses for retirees as part of actions already taken, says the report released today by Watson Wyatt Worldwide, a District-based human resources consulting firm that works with employers.
Big companies typically pay more than half of total retiree medical expenses. But increasing health care costs are forcing employers to scale back.
"The burden on future retirees to pay for their own medical costs is increasing dramatically, and far too few employees are prepared for these looming changes," said Sylvester J. Schieber, Watson Wyatt vice president and an author of the study.
"Retirees will have no choice but to assume greater responsibility for planning for medical costs during their retirement, including consideration of increased personal savings and even delayed retirement," Mr. Schieber said.
About 20 percent of employers studied have eliminated retiree medical plans for new hires, and 17 percent will require these hires to pay the full premium for coverage, the report said. Other companies are capping their contributions, linking them to the retiree's length of service or imposing stricter minimum-service requirements.
The study is based on benefit plans of 56 large employers, each having at least 5,000 employees. The growing population of retirees, rising life expectancies and uncertain business profitability also are contributing to the trend.
But workers are being confronted by health care concerns even before retirement nears. Employees now are paying more as their health benefits erode, according to a recent study by the Henry J. Kaiser Family Foundation.
The largest increase in premiums in 12 years occurred this year a rise of 13 percent. Single premiums typically are now $3,060, with $7,954 for family coverage.
The amount workers pay for coverage also has risen substantially. Employees now pay on average $454 per year for single coverage, a 26 percent, or $95, increase from last year. Family coverage averaged $2,084 a year, up 16 percent, or $283. For the first time in four years, more workers experienced a cut, rather than an increase, in benefits.
Retiree medical benefits were relatively inexpensive in the early 1960s, and the introduction of Medicare in 1965 made the benefits even more affordable. But the cost of maintaining them has surged.
Nine out of 10 large employers that offered retiree medical benefits to workers over age 65 in 1984 mandated service of five years or more. Last year, only about a quarter offered that benefit, according to Watson Wyatt. With reference to future retirees, only about 14 percent of companies allow workers to qualify that quickly.

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