Retiree health care is a disappearing benefit, with just 25 percent of large employers offering subsidized benefits to retirees age 65 and older today. Half of large employers did so in 2004, according to a new survey by employee benefits consultancy Aon Hewitt.
If you are currently retired and getting this benefit or are within a few years of retirement and expecting it, you probably don't have to worry that you'll lose out, but do expect changes in the way the plan operates, Aon Hewitt reports.
Of the 424 employers that Aon Hewitt surveyed -- employers that provide health care to 3.8 million retirees -- 20 percent, up from 3 percent today -- expect to move beneficiaries that are too young for Medicare to private health exchanges. The only thing slowing this move is the concern over how well this fledgling marketplace is operating, according to John Grosso, leader of Aon Hewitt's retiree health care task force. "The public market has to stabilize," Grosso says. But the motivation is strong. "It's much cheaper for an employer to put people in a public market."
Of those companies that offer health benefits to retirees 65 and older, 30 percent provide Medicare supplement or Medicare Advantage plan coverage through the individual Medicare plan market, most through a multicarrier private health exchange. Another two-thirds of employers that offer these benefits are considering that approach.
The deal is similar for both preretirees and retirees. They get a tax-advantaged subsidy from their employer to spend on a plan of their own choosing that best fits their needs. They shop with the help of what Grosso calls a "health care advocate who serves as their tour guide."
"It's a strong customer-service model," Grosso says. "We see it as a good thing for retirees."
This model is different from your father's retiree health care plan. Grosso says it gives retirees more responsibility for choosing the best plan for them, so failing to study the options is a big mistake. Also, these plans are locally based. If you live in a rural community, you will have fewer choices and you may pay more than you would in a metropolitan area.
The amount of the subsidy is strictly up to your former employer. It may grow with rising prices, but there is a good possibility that it won't. So reserving some of your nest egg to pay for health care when you are very old and need it the most is an excellent retirement planning idea.