5 8I0 12 14 16 13 118 15 II 7 Table 2 Table I Number and Percent of Workers in Employer-Sponsored Health Insurance Plans Percent of Private- and Public-Employer Health Insurance wlth an Employer Contribution to Coverage After Early or Normal Retirement: Table Table Table Table Table 36547 Table 8 data and analysis to inform theirEBRI debate. represent an important real income supplement for most of the retirees that private health Retirees one-quarter Retiree localWeemployees care Health estimate with employer- of cost employer-sponsored Insurance retirees that inflation that sponsored pathe rtwith as icipate continues presen ancoverage coverage Employee tcoverage invalue plans to_-epor from Benefit exceed ofwhere ted a p_ivate public general among the en_loyer en_ployer employers' inflation, recent c(23 oretirees ntliribu but percent) ability tes that(have and, had for the Plan Participants with an Employer Contribution to Coverage Medium-Size and Large Private Establishments Number • Percent and Number Distribution of Peo and ple Percent Age of 65 People of or People Older with with ARetiree ge 55 Health orHealth Older InsurInsurance, ance Private and People PublicNumber -EnAge _loyerand 55 orPercent LiOlder iabilitywith of People forRetiree Retiree ! Age Health 55Heaor lthOl Insurance dIer nsurance Benefits: Retiree health insurance- its cost, funding and future--has become the After Retirement, by Selected Benefit Provisions by Establishment Size and Industry Group, 1981-1985 T-66 with from Retiree by Sele Family cted Health Income Sources, Insurance and by Age,Age, by 1984 Age, 19841984 with Intelnnedi Retiree by Level ate HealthEstim of Insur Retiree ate,anceDiscounted Contribution by Type of Present Pension to Coverage, Value, Plan 1988 Sponsor a a retireeContinuation health insurance of health obligations insurance isbenefits approximately after retirement $169 billion.is aMost con_non of hthe conversely, ave full Employer-sponsored them.costtheir Inof 1984, coverage relatively more plans paid thlow anby are Fate one the -an half plan ofimportant public-plan of sponsor. the elderly source coverage). of withhealth retiree Amonginsurance covered health the difference full cost between of cover theagerates afterdeclines retirementincrementally paid by the over plan the sponsor. next 25 years. and Age of Retiree, 1986-1987 Percent a(dollars, nd Recipientin billions) Age, 1984 Type of Pension Plan Sponsor, and Retiree Age, 1984 basis of major concern and controversy among employers and public policy Increase Percent of all Recipients Total,Under Age 65 Age RecipientsAge Age 65 or Older Age this liability, nearly $I01 billion, is associated with current workers. The retirees iamong nsurancretirees. e age (56 percent) 75 In or 1984 older, had(the fa44 mimost lypercent income recenthad ofyear less coverage forthawhich n sponsored $20,data 000; are 79byper available), acent private had The feature ratesof ofboth inflation private are andassumed public to employer convergeplans. (at 5 In percent 1986, per three-quarters year) when Medium-Size and Large State and Local 1981 1985 in Work- Worker/Retiree Total with Private Public Percent Source of coverage Age 65+ 65-69 70-74 people with 75+ makers. Data on the prevalence or distribution of these benefits have been Private Employer Plans a Public Plans b ers with Total Numbera a Cumulative Percent within Total retiree Cumulative health Status retiree healthEmployersPercent with pe En_loyers nsion income with Total no Share of plan cost paid by retiree: present en_loyer, En_l fat amily oyer least invalue cLiability ome 11.3 and of million of31less corpor for percent than Retiree aretirees te $30,000 had liability Bene age coverage fits (see 55 for orTable from older current 5). ahad public retirees Retirees healthemployer insurance under is slightly age plan. from 65 with more an By aggregate (75.2 Employer percent) spending plans offorthat full-time health continue careworkers services coveragein reaches typically medium 22or continue percent large of benefits priv GNP.ateLsector at the Benefit Retirees Retirees Retirees Retirees Establishment size/ Number Number provision, Number of Family Retiree age (in(inmillions) percent of age group (in insur percent ance of Recipient coverage Private Public pension scarce. Nevertheless, employers with retiree health plans have claimed that Provision Under 65 65 or Older Under 65 65 or Older Industry group (in m%llions) Percent (in millions) Percent 1981-85 retirees All Part None Active Income worker coverage millions) beneficiaries millions) beneficiaries Age (in millions) Total b pension pension c income than $68 billion. he comparison, en_ployer-sponsored althRevinsur isedance among estima from tes younger plan aof (see past private retirees Table employer an 3). (age d public report Of65-69), these, e slightly mplat o7yer .6least million higher, liability 55 percent were butforage gener retiree of65 ally all or establishments same level as that participated provided into health workers insurance before retirement; plans that that continued is, the coverage scope with benefit from a current employer 8.5% 16.4% 7.2% 2.5% Current retirees $ 68.2 $ 23.0 $ 91.2 funding these benefits during active workers' careers (similar to the way that Total 11.3 23.6 I00.0 (in millions) (percent of participants) health retirees insurance with coverage benefits from are a past reported employer in Table apparently 8. Although had theirthese coverage estimates from acof older. With fter ompar services aCalculating retiree ble early Among levels retirement covered all the elderly of and annual family (before retirees' in cost i1984, ncome. ageto cost-sharing at 65); amortize le Inast more 1984, 29th employer percent under 4a7n per two-thirds cthe ent reported obligations plan of eare (68 ahaving rly .4maintained over percent) retirees health some Early retirement a Direct b 5.6 10.4 5.1 a less than $IO,000 0.5 11.7 1.2 14.8 Current workers 100.5 87.7 188.2 pensions are funded under current law) would represent an enormous current coverage 64% 58% 47% 44% All participants ToAge talDependent's 55-59 coverage11.3 c 1.2 2.9 19.8% 10.2 6.0 50.2% 22.1 9.7% 10.2 20.2a% ainsurance private en_ployer coverage pfrom lan; a28past percemployer ent had. public-employer sponsored coverage. are with hypothetical at preretirement reported These employer-sponsored estperiod together, imateslevels. isarethey fhe airly allth oHowever, ware relative single, insurance of public presumably and to reported policy th produces ose all thinterest faatmily plans some have idea inintegrate for cbome eenof very of presented theless different Medicare current thabny participated in plans that continued coverage after retirement at age 65 (U.S. with an employer Age 55-59 1.2 78.7 44.7 34.1 21.3 $All I0,000 retirees - $14,999 11.3 0.7 29.2 21.9% 1.5 39.3% 35.2 38.8% Total, retirees and Effect of retirement expense. While the Congress has been concerned that retirees who expect these contribution to Age Age current 60-64 60-64 workers 2.6 2.6 168.7 82.3 24.4 54.5110.7 27.8 23.1279.4 17.7 $20,000; other rese7a6rchers, percent and reported substanti famil ally y inclower ome ofthaless n the thantrillion-doll $30,000. ar estimates reasons. Dep coverage cost onabenefit rtment that into In funding of leparticul vel: Lplan abor,retiree benefits. ar, 1987). pri heavlth ateThat en_loyers benefit is, Medicare liabilities are confronting is "first-payor" may pose the for prospect for corporations services of new retiree coverage 11.2 61.1% 12.8 63.9% 14.3% References Age Retiree $15,000 65-69-coverage $19,999 from a2.9 0.7 82.146.7 54.0 1.6 28.1 55.817.9 U.S. House of Representatives benefits may have no real claim to benefits in the event a plan termination or No change 50 46 45 41 I ABe 70-74 2.1 79.2 49.6 29.6 20.8 past Age employer 65-69 2.9 29.6 32.9 32.9 30.0 25.2 26.3 AKe 55-64: Committee on Ways and Means that While have been most been retirees reportedreceive by thesomepress. contribution The singleto mthe ajor cost reason of their that these plan aggregately ac covered counting The .evolution byrules both Assuming that ofMedicare would retiree thatrequire coverage and en_loythem ers the asto retiree aare re feature cognize ableplan. ofon toen_loyer their amBecause ortize balance health unfunded Medicare sheets plans Establishment Reduced coveragesize: 12 i0 3 3 ABe 75+ 2.6 75.8 44.4 31.4 24.2 $20,000 Chollet, -D.J 24,999 . and R.B. Friedland, 0.4 "Employe63.8 r-Paid Retiree He 1.2 alth Insuranc7e: 0.2 Subconm_ittee on Oversight Source: Employee Benefit Research Institute, preliminary estimate. sponsor bankruptcy, the prospect of tax revenue losses may impede legislation Increased coverage I I c c I00 - 249 0.8 39.3 I.I 46.2 37.5 Direct b 23.7 24.7 23.6 22.9 Tot Age al History 70-74 and Prospects 3.82.1 for Growth," in19.3 F.B. 30.0 McArdle,42.2 ed., The18.8 Ch 38.5 anKinK estim (a characteristic ates Available appear data relatively of do private directly low andispublic not that indicate the plans y incthat lude whether isa clear do_lw theardfrom healatdjustment hthe insurance BLS data for li is liability abilities reflected Most pl for afor nsinbenefit that chigher urrentcontinue rates obligations retirees of coverage retiree overto afifteen fter retirees coverage retirement years, and, among aggreg potentially, recent alsoateprovide retirees. annualbenefit forcost an In integration substantially reduces plan costs, it has probably encouraged the 250 - 499 1.6 45.7 1.6 40.6 b Sun_ary: $25 Dependent's 000 Health - $29,999 Carecoverage Marketc 0.5(Washington, 5.9 76.2D.C.: 8.2 Employee0.7 Benefit 6.4 79.4 Research 3.4 Pension sponsor: Hearing on aEstimates include reductions in plan cost as a result of recent legislation allowing Retiree share tax preferences of cost: to encourage en_loyer funding. 500 - 999 2.4 61.3 2.2 63.4 -8.3 ABePrivate 55-64 3.8 2.0 81.2 14.3 51.4 36.4 29.7 49.3 18.8 Age 7Instit 5+ ute, 1987). 2.6 26.3 22.6 expanding Medicare benefits. O1_ average, corporate and public-employer o11 growth recent benefits activelegisl ofthworkers' health atation retirees insurance exp plans anding aredescribed as now Medicare a retiree receiearlier), ving benefits. benefit. are ansponsored important by minority a private report or public that promises would employer 1984, nearly be (or made appro sponsor) one-third xim toately current contribution of$7.4 the workers. billion. elderly toVirtually the ageThcost i65-69 s cof all ost(33 cover of alone percent) athis ge could (see liability reported Table represent I). is, health In ata Partial cost ].9 14 24 23 1,000 - 2,499 2.4 64.8 2.8 72.5 16.7 ABePublic 65+ 7.6 I.I 79.1 19.1 49.5 60.2 29.6 20.7 20.9 $30,0000 - $39,999 0.5 88.3 0.8 89.7 liabilities are estim Employer-Sponsored ated to decline Retiree by appro Health ximatelyInsurance 30 percent as a result No cost 33 34 24 24 2,500+ 3.5 73.2 5.0 80.7 42.9 of new Medicare benefits. Other private insurance 54.8 48.6 58.2 57.9 U.S. Department Not reported of Labor, 0.8 BureauSeptember of Labor 15,Statistics, 33.4 1988 Employee 29.6 Benefits 37in .1 they en_loyer. pay theNevertheless, full cost ofmost coverage retirees' themselves, health pl with an sponsors no sponsorcancontribution. be inferred present, subst 1986, insurance antial 64 unfunde coverage percent increase d. from ofAmortized full-time ina past annualand employer, workers corporate reported compared in over medium spending to somejust orallowable forlover arge health one-quarter private-sector perio insur d, ance this (26 Sununary: $40,000 or more 0.5 iOO.0 0.8 i00.0 Source:Medium Preliminary and LarKeEBRI Firms, tabulations 1986, Bulletin of the Survey 2281 (Washington, of Income and D.C. Program : U.S. This testimony examines the prevalence of retiree health insurance as an No retiree coverage 22 29 48 52 Industry group: Under Participation, age 65 matched3.8 Waves 2 through 17.1 5 (U.S. Department of 33.4 Commerce, Government Printing Office, June 1987), Tables 29 and 30. percent) 111 from 1984, The availof anearly value bleelderly data of 22 age percent the about 15newor their of older. Medicare all pension retirees benefits plan paid sponsors. to theplanfull From spocost nsothose rs of can dcoverage ata,vary we establishments benefits liability Since--would 1981 I0 had percent (the offset plans first or corporation that more yearcontinued for for corporations inwhich comecoverage data and, are consequently, that after available), sponsor early these reduce retirement the plans. number report with eof If d Manufacturing 6.3 59.F 7.3 64.4 15.9 Bureau of tile Census). No Age private 65 orinsur older ance 7.6 38.1 31.7 29.6 36.3 66.6 45.1 So KKeurce: 65+: Preliminary EBRI tabulations of the Survey of Income and Program employee Provision benefit, not and the prevalence and distribution of retiree health Nonmanufacturing 4.8 63.2 5.4 63.3 12.5 Note: Data Participation, omit individumatched als livin_ Waves in2 thro households ugh 5 (U.S. that were Department not interviewed of Commerce,at profit. radically estimate thBec from atause atplan lethese astto haplan, lfliabilities ofdepending all retirees areon une the with venly plan health distributed, provisions, insurance the from evenMedica aamong past re without workers the employers plan with a sponsor were sponsor health to paying amortize contribution; insurall ancethe orplans part famong ull that of cost retirees the continue ofplan retiree agecost; coverage 65health or 58 older, percent after liabilities 23 retirement hadpercent plans for determinable 2 2 2 2 Total Bureau of the Census). 7.6 Statement o23.2 f 37.9 38.9 Sour any ce: time Preliminary during the EBRI calendar tabulations year. Items of themay Survey not addof toInctotals ome andbecause Programof insurance benefits among both early retirees (age 55 to 64) and retirees age rounding. Note: Dat Parti a comit ipation, individuals matched living Waves in2 through households5 (U.S. that were Department not interviewed of Conm_erce, at Source: PensionPreliminary sponsor: EBRI tabulations of the Survey of Income and Program paid both en_loyers assignment retirees the full with rate and cost retiree among current ofphysicians health coverage workers,plans, in(see the the Table aannual areas reallignment 7). where cost Conversely, could retirees of exceed relati live, for ve$18and nearly corporate billion. a host 39 with em has ployer grown Employer-sponsored fullyrecei substantially. orve partly coveragesponsor-financed retiree Between from ahealth private 1981 insurance and coverage employer 1985, pl after the apl nsan; number represent retirement thatofis, private-sector a the asubstantial t age retiree 65. Retiree policy Retirement at age 65 c Private Bureau of the Census). 3.9 14.8 34.0 51.2 any time Participation, during the calendsr matched Deborah year. WavesJ. 2CItems hollet, throughmayPh.D. 5 not (U.S.addDepartment to totals ofbecause Commerce,of aFor people with only dependent's coverage fcom a spouse's plan, the 65 or older. The data presented include (and distinguish between) retirees not established 1 1 d d All participants Public Bureau of the Census). 2.2 Senior Research Associate 22.4 54.4 23.3 spo rounding. Note: use's Datpension a omit plan individu sponsor als living is Fepo?ted in .households that were not interviewed at profits percent of alsoother recei will of factors. ves retirees probably incomeOur with from estimates ensue. health a priIf, vassume ateinsurance as pension seems that the from likely, planew n a (see Medicare past equity Taemployer, blemarkets coverage 6). While the have reduces plan not 20 Approximately workers This share ann ofuwith althecost pla elderly's 39nscould percent that Medigap raise provide of workers annual insurance benefits spending in l(see after arger for Taearly ble private-sector health 4).retirement insurance Among all est grew abenefits blishments people by more age by with an employer Note: any aInclutime desDataduring only omitretirees the individuals calendar ages 55-64 living year. . inItems households may notthataddwere to not totals interviewed because at of bAlso Not inclreported udes military pensions 1.7 and other pensions 44.3 from unspecified 23.8 sources. 31.9 who receive private plan benefits and those who receive benefits from a public Other e 1 1 d d contribution to any rounding. time during the calendar year. Items may not add to totals because of CFederal, state, or local Bovetmment employee plan. CateBory excludes percent 65 sponsor fully employer or older anticipated paid of planretirees the with costs full private the bywith cost I0 retiree insurance of percent heacoverage. lth health insurance into1990, supplement benefit 40from percent Medicare a liability past in 1991, employer (62 percent of 45 percent indivi report ofdual the no in h more than ad he 14 than alth percent 25insurance percent (see for Table plans corporations 2); for the which number that the of plan sponsor private-sector sponsor retireepaid health workers the benefits. full with cost plans of retiree coverage I0.0 55.0 11.8 58.9 18.0 rounding. military a Statistically pensions.insignificant. Source: Preliminary EBRI tabulations of the Survey of Income and Program en_loyer plan--federal, state or local governments. Revised estimates of the Source: Estimated from: U.S. Department of Labor, Bureau of Labor Statistics, balncludes IncludesParticipation, primary-insured people with matched survivors' retirees Wavesand coverage 2 people throughand with 5 those (U.S. dependents' Department who report coverage. ofboth Commerce, direct cover current 1992, corporations, ageandpensi after 50onpercent the either income, reallignment ein arlysubsequent most or nolm_ ofofalthese corporate years. retirement. individu This profitability alsassumption, probablywould applied recei produce ve to their both an elderly that continue in 1984), coverage about after one-half- age 6547 grew percent- 18 -percent. had all or Thepart most ofrapid thatgrowth coverage of Establishment Employee size: Benefits in Medium and Large Firms, 1986, Bulletin 2281 and dependent's Bureau ofcoverage the Census). of the same type. present value of en_loyer liability are presented, differentiating between the IO0 - 249 0.8 39.3 1.0 42.6 12.5 (Washington, D.C.: U.S. Government Printing Office, June 1987), cNote: Excludes Data people omit individ with uboth als direct living andin dependent's households that coverage were ofnottheinterviewed same type. at health private provided adjustment The insurance and likelihood byinan public theemployer-sponsored relative benefits that plans,the value also reduces planof frspons ocretiree morporate estimated oar priv cohe ntributes ate sto alth liability cks. plan insur all sp ance onsor. byor plan. approximately part Atof Including least the cost 30 30 retiree Concluding benefits remarks occurred among workers in manufacturing establishments and 250 - 499 1.3 37.1 1.5 36.4 15.4 Tables 29 and 30; and U.S. Department of Labor, Bureau of Labor any time during the calendar year. Items may not add to totals because of liability of private and public employers and between liability for benefits 500 - 999 2.2 55.5 1.9 54.2 -13.6 Statistics, Employee Benefits in State and Local Governments, 1987, rounding. percent. per employer of cent coverage ofcoverage Without retirees is substantially presumed this now adjustment, receiving to be higher health received we among estimate insuran asretirees ace current that fromwith theaworker past present coverage employer benefit, value fromhave but ofa workers Fullyin or verypartly large sponsor-paid establishmentsretiree (establishments coverage is withless 2500common workersamong or The issues surrounding the retiree health insurance benefits provided by 1,000Bulletin - 2,499 2309 (Washington, 2.2 D.C.: 58.7 U.S. Government 2.6 Printing 67.3 Office,18.2May being provided for current retirees versus future benefits for workers not yet 1988), Tables 48 and 49. 2,500+ 3.2 67.9 4.8 76.8 50.0 private, possibly private coverage plan received corporate as con_ared a retiree as liability atoretiree, those from with for public nearly retiree public-plan 60 employment-- percent health coverage, offederal, benefits the elderly an observation state would withorbeprivate local $24 also7 more). public-sector The The issuesnumber workers associated of(state workers withand public in local medium-size employer government liability andemployees) large for retiree manufacturing than health among private corporations and public employers are difficult and con_lex. They Note: Data reflect benefits provided to full-time permanent employees. retired. Finally, estimates of the annual cost to employers of amortizing Detail Industry may group: not add to totals because of rounding or because the specific billion: $98 billion for current retirees, and $149 billion for current governmen consistent coveraget. towith supplement the reported Medicarefeatures derived of allactive or partworker of that plans. coverage Amongfromboth an priv insuran fundamentally establishments ate-sector ce are with workers somewhat includeplansin retirees' different that largercontinue . est ecoPublic-employer anomic blishments. benefits well-being after Inliabilities 1987, retirement and,nearly respectively, represent athalf age (4 657a provision was indeterminable. Manufacturing 5.6 52.4 6.7 59.1 19.6 unfunded liability for current retirees and workers are presented. aDataNonmanufacturing are for 1986, and exclude 4.5 Ii 58.6 percent of participants 5.0 58.6 in plans II.I which workers. en_loyer early claim retirees against plan. (age future55 tax to 64) dollars. and retirees The current age 65 or costolder of with stateprivate and local plan percent) grew corporate nearly offinancial 20 full-time percentstability state betweenor and 1981 local public-sector andgovernment 1985. Theworkers budgeting. number with of workers New employer-b accounting inased very continue access to coverage after retirement other than that required by federal law (COBRA), but to which the employer does not contribute. Estimates Source: Michael A. Morrisey and Gail A. Jensen, "Employer-Sponsored rules large coverage, gove_uEvidence nent establislunents are approximately likely obligations thattoprivate make withone-half for urgent this en_loyer retiree benefit tile (49 plans percent consideration health grewhave 50and benefits percent. been 51ofproviding percent, tax directly relief respectively) retiree affects to facilitate benefits their had health insurance had plans that would continue with a sponsor contribution assume that Post-Retirement specific benefit HealthprovBenefits: isions are The proportionately State of Knowledge distributedand among Some 2 Unresolved Issues," University of Alabama at Birmingham, working paper lans to which the employer does contribute. The views expressed in this statement are solely those of the author. They their with their AMost increasing operating sec coverage ond retirees major frequency, bu fully dgets who assumpaid preport and tionandposes byhealth implicit that theanretiree plan in insurance c inreasing our sponsor. coverage estimates from strain as a By past on aispublic fis the comparison, employer cal projected plan management. benefit live about rate in after funding early of coz-porate retirement;liabilities. 44 percent Wehadcongratul coverage ate ththe at Committee would continue for focusing with a Data are(September for 1987. 1988); Data and on the Gall number A. Jensen, of participants unpublished with tabulations retiree ofplans the should not be attributed to the officers, trustees, members, associates, to which the employer does not contribute are unavailable. U.S. Department of Labor Employee Benefit Survey, 1981 and 1985. contributors or subscribers of tile Employee Benefit Research Institute, its of inflation in health care services. The estimates reported here assume that sponsor matured IAlternative low- andcontribution relatively middle-income methods early, aofter f Medicare families. retirement is againintegration apparent Consequently, at age 65. are in the described About health relatively oneinsurance in: half high Dof .J.stbenefits rate aCte hollet and of Most on these statesissues and municipalities early, and stand are require ready dtotoassist balancethetheir Congress budgetsby annually. providing CLess than 0.05 percent. Note: Detail may not add to totals because of rounding. staff, or its Education and Research Fund. and R.B. Friedland, 1987. 2Because retirees in plans for whom the plan sponsor was indeterminable are dNo plan participants in this category. aData include workers with coverage that continues at least until age 65; excluded, the percent of retirees in private plans with coverage that is fully eIncludes employees who participate only in the employer's dental insurance workers with some other limited period of continuation are not included. paid by the plan sponsor may be biased upward slightly. plan and for whom health insurance coverage and provisions are unknown. bNo measurable change. EMPLOYEE BENEFIT RESEARCH INSTITUTE CData include only workers with coverage that continues indefinitely; 2121 K Street, NW / Suite 600 / Washington, DC 20037-2121 workers with a limited period of continuation are not included. Telephone 202-659-0670 FAX 202-775-6312