EBRI • Some employers have completely eliminated retiree health benefits. A recent survey of employers with 500 or Retiree Health Benefits worker share of the premium. Few workers will qualify for retiree health benefits as long as workers are no longer Individuals ages 55–64 have been less likely than the overall nonelderly population to be uninsured since STATEMENT OF P Principal Points AUL FRONSTIN Table 3 Chart 7 more workers found that 38 percent offered retiree health benefits to retirees under age 65 in 1997, compared EMPLOYEE Ch Ch Table 1 art 3 art 5 at least 1987 (chart 2). While they are less likely than the overall nonelderly population to have employment- tied to a job for life. SENIOR RESEARCH ASSOCIATE Percentage of Nonelderly with a Spell without Health Insurance, by Age, Table 2 Percentage of Employers Offering Health Benefits to Retirees, 1991 and 1996 Retiree health benefits were originally offered in the late 1940s and the 1950s, when business was booming as a Retirees Ages 55–64 with Retiree Heal Postretirement Nonpension Benefit Modifica Persons Ath Benefits or Uninsured, 1988–1996 ges 55-64 tions with 46 percent in 1993. This study may overstate the erosion of retiree health benefits, as it does not examine BENEFIT based coverage, they have not experienced the same erosion of health insurance coverage as the overall population AND October 1994 to September 1995 Persons Ages 35-64 with Selected Sources of Health Insurance, by Main Activity and Age, 1996 by Work Status and Self-Assessed Health Status, 1996 • result of economic expansions and there were very few retirees in relation to the number of active workers. Retiree Health insurance coverage for Americans ages 55–64 is an important issue. These individuals are particularly T-116 a constant sample of employers over time. New employers, those least likely to offer retiree health benefits, RESEARCH has experienced, and, in fact, have experienced a relatively large increase in the percentage covered by some form DIRECTOR, HEALTH SECURITY AND QUALITY RESEARCH PROGRAM Conclusion 50 health benefits were a simple benefit to provide. These benefits emerged as part of collective bargaining agree- vulnerable when it comes to their health insurance for a number of reasons. First, employment-based health Under Emplo Ages yment-Based Ages Ages Ages Ages Ages may enter the survey over time, giving the impression that employers are eliminating retiree health benefits. 4% A of employment-based health insurance. However EMPLOYEE BENEFIT RESEARCH INSTITUTE , starting in 1992, retirees ages 55–64 have seen a relatively large INSTITUTE ® Phase-out benefits and/or company contributions Total Workers Retirees Ill and Disabled Length of Spell Total Age 18 18–20 21–24 25–34 35–44 45–54 55–64 43.4% Total 43.3% Other Total 93% 42.3% ments, and employers were more than willing to provide them because the cost was such a small proportion of insurance is the primary source of coverage for 100 Americans of all ages, including those ages 55–64. As individu- An important question to ask is what the future looks like for retiree health benefits and employment-based 41.9% 42.1% better method of determining if employers are eliminating these benefits may be to examine a constant sample erosion in retiree health benefits and a subsequent increase in the number of uninsured, most likely in response to Benefit reductions and cost increases f BEFORE THE COMMITTEE ON LABOR 41.2% or new 92% 92% AND HUMAN RESOURCES 8% Total Private Total Own name Dependent Private Public Medicare Medicaid Uninsured Total 100% 100% 100% (millions) 100% 100% 100% 100% 100% total compensation. W als in this group make the transition from the labor force to retirement, they are at risk of losing health ith the enactment of Medicare in 1965, employer obligations became even less significant, 38.2% health benefits, in general, for individuals ages 55–64. The labor force participation rate of males ages 55–64 has employees and retirees 37.8% of employers instead of taking a random sample. 40 Another recent study of the same large employers in 1991 and FAS 106, as discussed below (chart 3). U.S. SENATE 36.6% 1–4 months 36.7 39.6 38.7 40.8 34.6 34.1 35.3 32.9 8% 1991 87% with resulting costs even lower as employers were able to integrate their retiree health benefits programs with insurance, or of paying a considerable amount for it in the individual market. While many can work, many (millions) stopped declining and may start to increase in the near future. With unemployment at its lowest rate since the Change in eligibility requirements 1996 found that virtually none eliminated retiree health benefits for retirees under age 65. These two surveys Among the uninsured population, individuals ages 55–64 are more likely than other age groups to experi- 5–8 months Total 21.5 22.8 21.5 JUNE 25, 1998 24.6 13.9 25.0 3.6 21.0 2.3 20.5 17.9 18.0 90 8% Medicare. The resulting liabilities were not substantial, and the financing of these benefits was not of concern. cannot because of poor health. Of the 21.5 million near elderly Americans, 2.3 million (about 11 percent) are not mid-1970s, employers are finding it increasingly difficult to retain skilled workers. Some employers may turn to Ages 35–44 9–11 months Excellent 43.7 8.8 33.3 8.64.2 31.1 10.8 3.3 22.6 10.2 8.5 0.6 10.2 2.2 0.0 4.4 7.7 0.8 7.5 3.1 6.6 7.2 would seem to indicate that, while very few employers that offer retiree health benefits are completely elimi- ence an uninsured spell of at least 12 months, suggesting that once they do become uninsured, it is more difficult Curtailments 1996 30 12 months V32.9 ery good 29.05.8 25.9 4.4 24.0 0.9 34.2 0.1 37.8 39.4 42.5 Working 37.4 30.6 28.8Uninsured 22.2 6.5 1.8Retiree health Retiree Health 2.1 0.2 1.3 5.6 However working because of an illness or disability , in more recent years, the changing demographics of the work force, combined with increased life expect- . Only those who are very poor or disabled qualify for health insur- the pool of retirees to fill job openings. This pool of retirees not only contains skilled workers but also workers with 15% nating the program, an ever-increasing proportion of Americans continue to lose access to these programs for them to obtain health insurance. For example, between October 1994 and September 1995, 42.5 percent of the Other modifications Retired Good 0.1 aaaaaaaaa 6.6 4.5 1.2 0.3 Statement Source: Employee Benefit Research Institute estimates of the 1993 Survey of Income and Program Participation (SIPP) Waves 6–9. ancy ance under the Medicaid or Medicare programs. , rising health care costs, downsizing, and early retirement, have left many employers with higher retiree-to- institutional knowledge and years invested in acquiring human capital. Employers could use the promise of lower because relatively young employers do not offer them to begin with. These studies may also understate the Mr uninsured ages 55–64 were uninsured for the entire 12 months, compared with 39.4 percent of those ages 45–54, . Chairman, ranking member Ill or disabled Fair 1.9 , and members of the Committee, I am pleased to appear before you today to 0.4 3.0 0.3 1.4 0.1 0.2 0.6 0.1 0.7 1.3 0.5 1.0 0.4 17% 80 Retiree contribution amounts adjusted annually active worker ratios and caused these liabilities to grow Poor 1.8 0.4 . 0.2 1.2 cost retiree health benefits to recruit and retain this pool of workers. Taking care of home or family 20 3.3 2.1 1.8 0.2 1.7 0.2 0.6 0.0 0.5 0.7 degree to which employers are dropping coverage because many employers, while continuing to offer retiree discuss health insurance coverage of the population ages 55–64. My name is Paul Fronstin. I am a senior research 37.8 percent among those ages 35–44, and 34.2 percent of those ages 25–34 (table 3). 16.7% 16.3% b 15.8% 22% Other 0.9 0.3 0.2 a 0.1 0.1 0.3 0.0 0.2 0.4 Cap on company contributions Before the • Health insurance for individuals ages 55–64 is also of concern because surveys of employers and retirees In December 1990, the Financial Accounting Standards Board (FASB) approved Financial Accounting During this time of low unemployment, few employers are thinking about downsizing and layoffs. How- 13.2% health benefits to some workers, have terminated the program for workers hired after a certain date. It may be 29% associate and director of the Health Security and Quality Research Program at the Employee Benefit Research 12.1% 12.1% (percentage within work status category) 11.7% 11.1% 10.4% Ages 45–54 33.0 26.2 24.3 Ch 18.2 art 1 6.1 1.9 3.6 0.9 1.9 4.5 Statement No. 106 (F indicate that there is a continuing significant erosion of retiree health benefits. In addition, the individual AS 106), “Employers’ Accounting for Postretirement Benefits Other than Pensions.” FAS 106 ever, if the economy experiences a recession, employers will start to once again think about how to best manage Cost-sharing premiums 10 or 20 years before we see the real effects of the erosion of retiree health benefits. Institute (EBRI), a private, nonprofit, nonpartisan, public policy research organization based here in Washington, Health Insurance and Retirement 10 70 Working 27.8 23.7 22.1 17.7 4.5 1.6 1.6 0.1 0.6 3.4 Percentage of Uninsured Americans, by Age, 1996 requires companies to record unfunded retiree health benefit liabilities on their financial statements in order to market is not always a feasible alternative for the near elderly if they are subject to medical underwriting and Total 100% 100% 100% 100% the size of their work force. Committee on Labor and Human Resources As many employers have de-emphasized defined benefit pensions plans, and have put Retirees under Age 65 Medicare Eligible Retirees DC. EBRI has been committed, since its founding in 1978, to the accurate statistical analysis of economic security Retired 0.4 0.3 0.2 0.1 0.1 a 0.1 0.1 a 0.1 0 5 10 15 20 25 30 Excellent 20 24 18 1 comply with generally accepted accounting standards, beginning with fiscal years after December 15, 1992. preexisting condition exclusions. While continuation-of-coverage is available for many early retirees for As a more emphasis on defined contribution pension plans, they have lost a natural tool to manage their labor force. Findings from the 1998 Health Confidence Survey (HCS), a public opinion poll on health care co-sponsored by the Ill or disabled 2.1 0.7 0.6 0.3 0.3 0.1 1.5 0.7 1.0 0.3 • An important question to ask is what the future looks like for retiree health benefits and employment-based U.S. Senate Percentage issues. Through our research we strive to contribute to the formulation of effective and responsible health and Very good 27 31 25 3 Source: Hewitt Associates LLC, 1997. 28.9% Taking care of home or family 2.1 1.3 1.2 0.1 1.0 0.2 0.3 a 0.2 0.5 Source: Buck Consultants, 1995. 0 result, the retiree health care liabilities required to be listed on a balance sheet in accordance with F 18 months under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), and is probably a AS 106 far Under a defined benefit plan, the employer usually offered reduced pension benefits at an early retirement age Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, point to a direct link between a 30 Good 31 32 34 14 health benefits, in general, for individuals ages 55–64. The labor force participation rate of males ages 55–64 retirement policies. Consistent with our mission, we do not lobby or advocate specific policy solutions. b Other 0.5 0.2 0.2 0.1 0.1 0.1 0.1 a 0.1 0.2 1988 1989 1990 1991 1992 1993 1994 1995 1996 Fair 14 10 17 32 exceed the costs that appeared prior to this standard. bargain when compared with purchasing health insurance on the individual market, it is also very costly. and full pension benefits at a normal retirement age. Using traditional defined benefit pension plans, employers worker’s decision to retire early and the availability of retiree health insurance. In 1998, 74 percent of workers has stopped declining and may start to increase in the near future. With unemployment at its lowest rate since 22.5% Hearing on Ages 55–64 Poor 21.5 16.2 9 14.0 3 10.6 3.5 6 2.2 50 3.9 1.8 1.6 3.0 25 Year In response to FAS 106 and increases in health care costs, some firms have dropped retiree health ben- were able to provide additional incentives to get workers to take early retirement when there was not enough reported that they would not retire before becoming eligible for Medicare if their employer did not provide retiree the mid-1970s, employers are finding it increasingly difficult to retain skilled workers. Some employers may Introduction Working 13.9 11.8 10.5 8.7 1.8 1.3 1.1 0.2 0.3 1.6 Health Insurance and Older Workers efits, while others still have no plans to change their existing benefit provisions. However • While the issue of health insurance for the near elderly population is an important one, it should be noted that , the vast majority of revenue to sustain the size of their work force. Employers cannot design defined contribution plans, such as 401(k) health benefits. Yet, HCS shows that 45 percent plan to retire before age 65. HCS also found that 82 percent of Retired Source: Emplo 3.6 yee Benefit Research Institute estimates from the March 1997 Current 2.6 2.1 1.4 0.7 0.5 0.8 0.5 0.1 0.6 turn to the pool of retirees to fill job openings. This pool of retirees contains not only skilled workers but also 16.4% 20 Source: Employee Benefit Research Institute estimates from the March 1989–1997 Current Population Surveys. Population Survey. Ill or disabled 2.3 0.8 0.6 0.3 0.3 0.2 1.7 1.0 0.9 0.3 companies have made numerous modifications to their retiree health benefit programs. For example, one study this age group, when compared with other age groups under age 65, is least likely to be uninsured. 14.8% Almost plans, with an incentive for workers to retire at any specific age. Since the emphasis in retirement planning has Health insurance coverage for responding workers believed they would need additional health insurance coverage beyond what is provided by Americans ages 55–64 is an important issue for all Americans. Americans ages workers with institutional knowledge and years invested in acquiring human capital. Employers could use the 13.7% 13.9% Taking care of home or family 1.4 0.9 0.7 0.1 0.6 0.1 0.2 0.1 0.1 0.4 found that 51 percent of responding employers have modified or are considering modifications to their 14 percent of individuals ages 55–64 were uninsured in 1996, compared with 14.8 percent of individuals under 55–64 are particularly vulnerable when it comes to their health insurance for a number of reasons. First, employ- shifted away from traditional defined benefit plans, employers that already offer retiree health benefits may the Medicare program, and 47 percent expected their former employer to provide retiree health insurance. Not b 15 promise of lower cost retiree health benefits to recruit and retain this pool of workers. In contrast, if the Other 0.3 0.1 0.1 aaaaaa0.1 postretirement nonpension benefit program (Buck Consultants, 1995). This survey studies the year age 18, 28.9 percent of those ages 18–24, 22.5 percent of those ages 35–34, 16.4 percent of those ages 35–44, -end 1993 and surprisingly ment-based health insurance is the primary source of coverage for hesitate to eliminate them, as they may become a major tool to manage the work force in the future. , this number is down from 54 percent in 1993. Using data from the 1992 Health and Retirement Americans of all ages, including individuals economy experiences a recession, retiree health benefits may become as major tool employers use to manage (percentage within main activity category) 10 1994 annual reports of 489 Fortune 1000 companies that adopted F and 13.7 percent of those ages 45–54. Individuals ages 55–64 have been less likely than the overall nonelderly by AS 106. Of those companies indicating that Study ages 55–64. , we have also found that individuals are more likely to expect to retire before age 65 if they expect to have Mr. Chairman, this concludes my statement. Thank you for the opportunity to testify today As individuals in this age group make the transition from the labor force to retirement, they are at . I would be their work force, since the emphasis in retirement planning shifted has away from traditional defined benefit Ages 35–44 100.0% 76.3% 71.2% 51.7% 19.6% 5.1% 10.1% 1.8% 7.1% 16.4% they had modified their plans, the most common modification was a change in cost-sharing provisions (29 percent), population to be uninsured since at least 1987. happy to answer any questions that you or members of the committee may have. risk of losing health insurance, or of paying a considerable amount for health insurance in the individual market. retiree health insurance (chart 4). Paul Fronstin, Ph.D. plans. Working 100.0 81.8 76.8 59.4 17.4 4.9 5.6 0.4 3.5 15.0 5 followed by a cap on company contributions (22 percent) (chart 5). Only 4 percent of surveyed employers had made While many can work, many cannot because of poor health. Of the 21.5 million near elderly Retired The rationale for why availability of retiree health insurance should affect the retirement process is 100.0 36.8 22.3 19.3 2.9 14.6 37.6 10.1 Americans, 2.3 million 13.6 37.6 Senior Research Associate Ill or disabled 100.0 19.6 15.9 6.2 9.7 3.7 69.0 27.9 52.8 19.9 or were considering making modifications that would entirely phase out retiree health benefits and/or company • Among the uninsured population, individuals ages 55–64 are more likely than other age groups to experience straightforward. (about 11 percent) are not working because of an illness or disability (table 1). Only those who are very poor or 0Almost 75 percent of wage and salary workers ages 18–64 have employment-based health cover- Bibliography and Chart 6 Taking care of home or family 100.0 61.9 55.6 4.9 50.6 6.4 19.2 0.4 16.2 21.7 0-17 18-24 25-34 35-44 45-54 55-64 Chart 4 contributions. an uninsured spell of at least 12 months, suggesting that once they do become uninsured, it is more difficult for age. This insurance is portable only in the sense that some workers have the option of continuing their coverage disabled qualify for health insurance under the Medicaid or Medicare programs. b Percentage of Large Employers Offering Retiree Health Benefits, 1993–1997 Other 100.0 28.7 20.5 4.7 15.8 8.2 30.4 4.1 25.5 44.3 Director, Health Security and Quality Research Program Expected Retirement Pattern, by Retiree Health Insurance Availability, Buck Consultants. Analysis of Postretirement and Postemployment Benefit Disclosures from Corporate Financial Age Cohort them to obtain health insurance. For example, between October 1994 and September 1995, 42.5 percent of the Some employers have completely eliminated retiree health benefits. A recent survey of employers with under COBRA. Otherwise, without the availability of retiree health insurance, retirees may not have access to Health insurance for individuals ages 55–64 is also of concern because surveys of employers and retirees Ages 45–54 100.0 79.6 73.7 55.3 18.4 5.9 11.1 2.9 5.7 13.7 Wage and Salary Workers, Aged 51–61, 1992 Statements: FAS No. 106 and FAS No. 112. New York, NY: Buck Consultants, November 1995. 500 or more workers found that 38 percent offered retiree health benefits to retirees under age 65 in 1997, com- uninsured ages 55–64 were uninsured for the entire 12 months, compared with 39.4 percent among those ages health insurance coverage until they reach age 65, unless they have access to coverage through a spouse. indicate that there is a continuing significant erosion of retiree health benefits, a problem which may be under- Working 100.0 85.4 79.7 63.7 16.0 5.7 5.8 0.4 2.2 12.3 Source: Employ 50 ee Benefit Research Institute estimates from the March 1997 Current Population Survey. Primary Respondents Onl Chart 8 y Copeland, Craig. “Characteristics of the Nonelderly Population with Selected Sources of Health Insurance and Retired 100.0 64.9 55.1 22.3 32.8 9.8 28.3 12.2 8.6 17.0 pared with 46 percent in 1993 (chart 6). The survey also found that 31 percent of employers offered retiree health 45–54, 37.8 percent among those ages 35–44, and 34.2 percent among those ages 25–34. stated for a number of reasons that will be addressed below While some workers have access to retiree health insurance, most do not or do not even know if they . In addition, the individual market is not always a Labor Force Participation Rate, by Age and Gender, 1948–1995 Ill or disabled 100.0 31.4 26.7 12.2 14.5 4.7 70.2 35.1 45.1 13.1 Employee Benefit Research Institute Lengths of Uninsured Spells.” EBRI Issue Brief no. 198 (Employee Benefit Research Institute, June 1998). Under Age 65 Medicare-eligible Medicare-Eligible benefits to Medicare-eligible retirees in 1997, compared with 40 percent in 1993. This study may overstate the feasible alternative for the near elderly if they are subject to medical underwriting and preexisting condition would have coverage if they retired. EBRI analysis of the April 1993 Current Population Survey found that 45% 46% 42% Taking care of home or family 100.0 64.1 56.4 6.8 49.6 7.7 14.7 0.8 8.8 24.9 90 Paul Fronstin. “Employee Benefits, Retirement Patterns, and Implications for Increased W b 2121 K Street NW, Suite 600 ork Life.” EBRI Issue erosion of retiree health benefits, as it does not examine a constant sample of employers over time. New employ- • While individuals ages 55–64 are less likely than the overall nonelderly population to have employment-based exclusions. While continuation-of-coverage is available for many early retirees for 18 months under the Consoli- 34 percent of workers ages 45 and older worked for an employer that sponsored retiree health insurance either Other 100.0 43.5 33.5 10.6 22.9 10.0 20.0 2.4 13.3 41.0 Chart 2 40%45 80 Brief no. 184 (Employee Benefit Research Institute, April 1997). Washington, DC 20037 ers, those least likely to offer retiree health benefits, may enter the survey over time, giving the impression that coverage, they have not experienced the same erosion of health insurance coverage as the overall population throughout their retirement (29 percent) or only until they reach age 65 (5 percent). While 15 percent reported dated Omnibus Budget Reconciliation Act of 1985 (COBRA), and is probably a bargain when compared with 43% Ages 55–64 Percentage of Americans with Emplo 100.0 75.7 yment-B 33% 65.3 ased Heal 49.2 16.1 th Insur 10.4ance and Uninsured, 1987–1996 18.2 8.5 7.3 13.9 35% ________. “Features of Employment-Based Health Plans.” Paper presented at the EBRI–ERF Policy Forum on The 70 Working 100.0 85.5 75.9 62.8 13.0 9.6 7.9 1.3 2.5 11.5 employers are eliminating retiree health benefits. has experienced, and, in fact, have experienced a relatively large increase in the percentage covered by some A better method of determining if employers are eliminating that retiree health insurance was not available, 21 percent did not respond to the question or did not know the purchasing health insurance on the individual market, it is also very costly Voice: 202/775-6352 . 41% Retired 100.0 72.1 58.1 37.8 20.3 14.0 23.1 14.8 4.1 16.7 Future of Medical Benefits, W 30% ashington, DC, May 6, 1998. 60 40% retiree health benefits may be to examine a constant sample of employers instead of taking a random sample. form of employment-based health insurance. However 70 , starting in 1992, retirees ages 55–64 have seen a 40% answer, and 30 percent did not have access to health insurance through their employer As will be discussed in the next section, while health insurance is an important issue for the near elderly 40% . If we assume that the Fax: 202/775-6312 Retiree Health Expected Ill or disabled 100.0 34.1 25.3 13.6 11.7 8.8 73.6 44.9 40.8 12.2 69.2% 40 69.0% ________ “Medicare as an Option for 68.6% Americans Ages 55–64: Issues to Consider.” EBRI Notes no. 2 (Employee Another recent study of the same large employers in 1991 and 1996 found that virtually none eliminated retiree relatively large erosion in retiree health benefits and a subsequent increase in the number of uninsured, most 50 67.0% population, this age group, when compared with other age groups under age 65, is least likely to be uninsured. 21 percent who did not know the answer or did not respond to the question do not have access to retiree health 25% Taking care of home or family 21% 100.0 61.1 51.8 9.8 42.0 9.3 17.2 4.0 8.7 27.9 66.3% E-mail: fronstin@ebri.org 38% 64.7% b 64.0% 63.5% 63.8% Benefit Research Institute, February 1998). 63.6% 18% Retiree Health Not Expected Other 100.0 53.9 35.6 18.4 17.2 18.3 14.9 2.4 6.6 37.3 health benefits for retirees under age 65 (chart 7). In contrast, employers were found to eliminate retiree health likely in response to F 60 AS 106. insurance, then 66 percent of workers ages 45 and older do not have access to retiree health insurance. Even However, for those who are uninsured, the duration of their uninsured status is longer than that of other age 40 17% 20% Internet: http://www.ebri.org 16% ________ “Portability of Health Insurance: COBRA Expansions and Job Mobility.” EBRI Issue Brief no. 194 benefits for Medicare-eligible retirees. These two surveys would seem to indicate that, while very few employers groups. among workers with health benefits in retirement, most would be required to pay at least a portion of the pre- Nonelderly Population 30 13% 35% Source: Employee Benefit Research Institute estimates from the March 1997 Current Population Survey 15% 12% 50.4% 49.2% 10% (Employee Benefit Research Institute, February 1998). a 48.5% 48.4% 35 that offer retiree health benefits are completely eliminating the program, an ever • Findings from the 1998 Health Confidence Survey (HCS), a public opinion poll on health care co-sponsored by 50 -increasing proportion of Ameri- mium, and in some cases, all of it. Less than 50,000 weighted respondents. Numbers less th 47.4% an 50,000 should be interpreted with caution, as they are based on a relatively small sample. 47.0% 46.9% 46.4% 20 46.5% Males Aged 55-64 Females Aged 55-64 46.0% Males Ages 55–64 Females Ages 55–64 8% 33% b 10% 6% Ages 55-64 ________. “Retiree Health Benefits: What the Changes May Mean for Future Benefits.” Other includes going to school, unemployed, and other. EBRI Issue Brief no. 175 cans continue to lose access to these programs, as relatively young employers do not offer them to begin with. I the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & 5% Associates, point to a direct link Workers considering retiring early could obtain health insurance prior to becoming eligible for Medicare Health Insurance Coverage 1987–1996 10 31% (Employee Benefit Research Institute, July 1996). 5% would note, however between a worker 40 , that most data sets have shortcomings that make comparisons over time difficult, make ’s decision to retire early and the availability of retiree health insurance. In 1998, 74 percent either through a spouse or in the private market for insurance. However, even for workers who qualify for health Nonelderly Population 0 Employment-Based ________. “Sources of Health Insurance and Characteristics of the Uninsured: Although individuals ages 55–64 have lower labor force participation rates than other age groups, the majority— Analysis of the March 1997 Current comparisons with one another difficult, make generalizations difficult, and may ultimately call into question the of workers reported that they would not retire before becoming eligible for Medicare if their employer did not insurance in the private market through the guaranteed issue provisions of the Health Insurance Portability and 0%30 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 Ages 55-64 65.3 percent—get their health insurance coverage through an employment-based plan (table 2). This compares Population Survey Stop Working.” EBRI Issue Brief Stop Working Never Stop no. 192 (Employee Benefit Research Institute, December 1997). No Thought Work Fewer Change Kind 1993 1994 Held June 25, 1998 1995 1996 1997 conclusions that studies draw from the data. provide retiree health benefits. 30 Yet HCS shows that 45 percent plan to retire before age 65. HCS also found Accountability Act of 1996 (HIPAA), purchasing health insurance in the private market may not be affordable. Year Before Age 65 After Age 64 Given Hours of Work Working ________. “T with 71.2 percent of individuals ages 35–44 and 73.7 percent of those ages 45–54. Individuals ages 55–64 are more rends in Health Insurance Coverage.” EBRI Issue Brief no. 185 (Employee Benefit Research Institute, that 82 percent of responding workers believed they would need additional health insurance coverage beyond The erosion of retiree health benefits may be understated for a number of reasons. First, the return of Year Employers that provide access to group health insurance often are able to obtain lower premiums than individuals Uninsured Source: U.S. Department of Labor, Bureau of Labor Statistics. Expected Retirement Pattern likely than other age groups to have purchased insurance directly from an insurance company May 1997). . Almost 17.7% older women to the labor force has undoubtedly increased health insurance coverage rates among their retired what is provided by the Medicare program, and 47 percent expected their former employer to provide retiree Source: 20 William M. Mercer. can because insurance companies can spread the risk across a larger group of people, and the average administra- 17.3% 17.4% 17.1% 17.0% 16.1% 16.3% 15.7% 15.5% 14.8% Hewitt 10.5 percent have such a policy Associates LLC. “Retiree Health T , compared with 5.1 percent of individuals ages 35–44 and 5.9 percent of those ages rends and Implications of Possible Medicare Reforms.” Report prepared spouses. In 1948, 24.3 percent of women ages 55–64 were participating in the labor force (chart 8). By 1995, their health insurance. Not surprisingly, this number is down from 54 percent in 1993. tive costs are lower. In addition, the need for health insurance increases with age. Older individuals are relatively Source: Employee Benefit Research Institute estimates from the 1992 Health and Retirement Survey, Wave 1. 45–54. The high rate of privately purchased coverage among the near elderly is a result of their weak attachment for The Henry J. Kaiser Family Foundation. September 1997. 13.9% labor force participation rate was bordering on 50 percent. 10 At the same time, labor force participation rates among more likely to report having been diagnosed with a serious health condition, and they spend a greater proportion 13.4% 13.4% 13.9% 12.9% 12.7% 12.7% 11.3% 11.5% 10.8% U.S. General to the labor force and their increased likelihood of being retired or disabled. They are less likely to have employ- Accounting Office. Private Health Insurance: Declining Employer Coverage May Affect Access for 55- near elderly males are no longer declining, which may account for an increase in the percentage of older males • In response to FAS 106 and increases in health care costs, some firms have dropped retiree health benefits, of their family income on medical expenses. As a result, lack of health insurance during retirement could be an ment-based health insurance, yet they are more likely than others to need some form of health insurance. to 64-Year-Olds. GAO/HEHS–98–133. Washington, DC: U.S. General Accounting Office, June 1998. covered by employment-based health insurance. while others still have no plans to change their existing benefit provisions. However 0 As a result of these labor market dynamics, more individuals ages , the vast majority of impediment to early retirement. On the other hand, individuals ages 55–64 may be unable to work because of a The views expressed in this statement are solely those of the author and should not be attributed to the William M. Mercer Individuals ages 55–64 are not significantly more likely than other age groups to be uninsured. In fact, . Mercer/Foster Higgins Survey of Employer–sponsored Health Plans 1997. William M. Mercer, 55–64 have access to health insurance coverage through the work place. Second, it may be 10 or 20 years before companies have made numerous modifications to their retiree health benefit programs. For example, one study serious health condition, which may exacerbate the issue of obtaining affordable health insurance. Employee Benefit Research Institute, or the EBRI Education and Research Fund, its officers, trustees, 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 they are least likely to be uninsured. 1998. Almost 14 percent of individuals ages 55–64 were uninsured in 1996, com- we see the real effects of the erosion of retiree health benefits. While many employers continue to offer retiree found that 51 percent of responding employers have modified or are considering modifications to their sponsors, or other staff, or to the EBRI-ERF American Savings Education Council. The Employee Benefit Year pared with 14.8 percent of those under age 18, 28.9 percent of those ages 18–24, 22.5 percent of those ages 35–34, health benefits, some have cut back on the program by either terminating it for workers hired after a certain date postretirement nonpension benefit program. Only 4 percent of surveyed employers had made or were consider- Research Institute is a nonprofit, nonpartisan, public policy research organization which does not lobby or Source: Employee Benefit Research Institute estimates from the March 1988–1997 Current Population Surveys. 16.4 percent of those ages 35–44, and 13.7 percent of those ages 45–54 (chart 1). or by imposing vesting schedules that affect whether a worker qualifies for retiree health benefits as well as the ing making modifications that would entirely phase out retiree health benefits and/or company contributions. take positions on legislative proposals. 6 3 4 5 10 12 11 9 2 1 7 8 Percentage Percentage Percentage Percentage Percentage Percentage Uninsured Percentage