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Division of Aging and
Adult Services
PO Box 1437
Slot S-530
Little Rock AR 72203

By Herb Sanderson, Director
Division of Aging & Adult Services

This column appears in the February 2002 edition of Aging Arkansas,
a publication of the Arkansas Aging Foundation and the
DHS Division of Aging and Adult Services

Recently the US Congress asked the General Accounting Office (GAO) to provide information on trends in employer-sponsored retiree health benefits and implications for retirees who may seek alternative sources of coverage.

William J. Scanlon, Director of Health Care Issues for GAO, summarized the findings by stating, “Some retirees face gaps in coverage to meet their health care and long-term care needs because the availability of employer-sponsored retiree health benefits is declining and alternative sources of coverage are costly or limited. Despite several years of a sustained strong economy and relatively low increases in health insurance premiums during the late 1990s, the availability of employer-sponsored retiree health benefits has eroded.”

Mr. Scanlon explained while current retirees continue to receive employer provided health insurance, future retirees will not fair as well. “Two widely cited surveys found that coverage has declined such that about one-third of large employers and less than 10 percent of small employers offer retiree health benefits.

“Nonetheless, the percentage of retirees with employer-sponsored coverage remained relatively stable between 1994 and 1999, covering about 57 percent of retirees aged 55 to 64 and providing Medicare supplemental coverage to about 32 percent of retirees 65 or older. To some extent, these differing trends may reflect employers' tendency to eliminate coverage for future rather than current retirees.

“Some employers that continue to offer retiree health benefits, however, have reduced these benefits by increasing the share of premiums that retirees pay, increasing copayments and deductibles, or limiting future commitments for what they will spend for retiree coverage. For example, an increasing share of large employers that offer retiree health benefits — about 40 percent in 2000, about 8 percentage points higher than in 1997 — require retirees younger than 65 to pay the entire premium. Increasing cost pressures on employers, such as rising premiums and a weakening economy, suggest that erosion in retiree health benefits may continue.”

With the declining availability of employer-sponsored retiree health benefits, alternative sources of health coverage for retirees may be costly, more limited, or unavailable (according to the GAO testimony before Congress).

The fact that neither Medicare nor private insurance covers a significant share of long-term care services also looms as a problem for retirees. The potentially catastrophic costs of long-term care are currently paid primarily by Medicaid, the joint federal-state health financing program designed for certain low-income individuals, and by individuals out — of their own pocket. Private long-term care insurance plays a small role in financing nursing home care, which averages $55,000 per year in the US.

Compounding the problem is the fact that the health care needs of retired Americans are likely to grow significantly as the baby boomers age.

The report concludes that, at an age when their health care needs are likely to grow, retirees who lose access to employer-sponsored coverage may face limited coverage alternatives; and those who are unable to obtain coverage may do without or begin to rely on public programs such as Medicaid.

The baby boomers may soon learn aging is not for sissies.