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Survey Projects Heavier Health Care Burden for Retirees

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WASHINGTON _ Fewer retirees will have employer-sponsored health coverage in the future and those who do will pay a larger share of the costs, according to a survey of large employers released Wednesday.

The Kaiser Family Foundation and Hewitt Associates surveyed 408 large private-sector companies that offer health benefits.

Ten percent of the companies said they had eliminated subsidized health benefits for future retirees during the past year. Another 20 percent said they would likely terminate health coverage for future retirees in the next three years.

The survey found that most firms had increased the amount retirees must contribute to health premiums in the past year, and 86 percent planned to increase such contributions within the next three years.

The changes mostly affect new hires or current employees, as opposed to current retirees.

Workers who retire before becoming eligible for Medicare typically rely on employers to provide health coverage. Those aged 65 and older generally use employer plans to supplement Medicare.

Health care expenses continued to rise among surveyed companies. Employers paid $18.1 billion in 2002 to provide coverage to retirees and their dependents. The following year, the total climbed 13.7 percent to $20.6 billion.

Prompted by the higher costs, nearly half of all surveyed companies placed caps limiting the dollar amount they will spend on future retiree health obligations.

The caps require retirees to absorb a greater share of costs when spending exceeds a certain amount. One-third of the firms already have either reached their caps or expect to within the next one to three years.

"Speaking as an employer, the message is that it is a struggle with balance," said Mertroe Hornbuckle, vice president of human resources for John Deere and Co.

The cost increases, financial caps and the impact on the bottom line have caused companies to re-examine their health care programs and make changes, Pew and Hewitt said.

"A number of these changes shift cost to the retirees," said Dr. Patricia Neuman, Kaiser Family Foundation vice president.

Most companies in the past year, for instance, raised drug copayments, coinsurance and general cost-sharing requirements. Some boosted deductibles, out-of-pocket limits and hospital copayments.

Employees can assume health coverage will worsen. Most firms said they would hike cost-sharing requirements, deductibles, physician and hospital copayments and out-of-pocket limits within the next three years.

Retirees "will have to find other ways to finance retirement" health care, said Dr. Frank McArdle, Hewitt Associates' Washington research office manager.

Yet the study offered some hope. Twelve percent of the companies said they improved or added retiree health coverage during the past year, and 98 percent of the respondents said they were unlikely to eliminate prescription drug coverage.

The survey, however, was taken between June and September of last year, before President Bush enacted new Medicare prescription drug legislation.

Kaiser and Hewitt's survey did not assess how employers view the Medicare drug plan. The groups felt the details of the Medicare plan were in flux, and it would have been unfair to ask employers to speculate on the proposed revisions. But representatives did wonder how the changes would affect retirees.

"A big question is whether the new Medicare drug law will encourage employers to stay in the game," Neuman said.

The majority of the companies surveyed are multistate, publicly traded employers. They represent a wide range of manufacturing and nonmanufacturing industries.

The Kaiser Family Foundation is a nonprofit, private operating organization dedicated to providing information and analysis on health care issues to policy makers, the media, the health care community and the general public. Hewitt Associates is a human resources firm with offices in 38 countries.

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