Employers increasingly dropping insurance for younger retirees

WASHINGTON -- Employers are increasingly dropping health insurance coverage for their younger retirees, a study finds, suggesting the problem of providing prescription medicine for the elderly may be growing more urgent.

Many employers offer their retirees coverage to fill in the gaps in Medicare coverage. That includes prescription drugs, which Medicare does not generally pay for outside a hospital.

Congress is now working to add a drug benefit to Medicare. Many worry that employers will drop their drug coverage once the government starts offering to pay for prescriptions. The Congressional Budget Office estimated that, under a Senate bill, 37 percent of employers would drop this coverage.

The House and Senate have each passed Medicare drug bills and are now trying to reconcile differences between them.

The new study, being released today, finds that in 2000, 39 percent of people ages 65 to 69 got health insurance from an employer. That's down from 46 percent in 1996.

Similar decline

There was a similar decline in employers offering drug benefits to young retirees -- from 40 percent to 35 percent, according to the study in the online version of the journal Health Affairs.

About one in three Medicare beneficiaries gets drug coverage from an employer. Some of these benefits have been negotiated through union contracts, while others are offered voluntarily. In 2003, employers spent an estimated $22.5 billion on retiree drug benefits.

As drug costs rise, employers are increasingly cutting benefits, especially for future retirees, experts say. The study found benefits for older retirees stable.

"The future of employer-sponsored health insurance looks bleak," said Bruce Stuart of the University of Maryland School of Pharmacy, the study's lead author. "In the face of continued rising prescription drug costs, employers may choose to abandon providing any coverage at all."

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On the Net:

Health Affairs: http://www.healthaffairs.org