Retiree health benefits are expected to take a major hit. Most employers (77 percent) believe reform is going to reduce the number of large employers offering employer-sponsored retiree health benefits, and 43 percent of employers that currently offer retiree benefits plan to reduce or eliminate them.
"Just as many baby boomers are deciding whether to delay retirement, employers will be determining if it makes financial sense for them to remain in the retiree medical business," said Dave Osterndorf, a senior consulting actuary with Towers Watson. "Post-65 retirees already have a range of cost-effective options as individual consumers. Beginning in 2014, when health insurance exchanges become operative, pre-65 retirees will have access to competitive plan choices without preexisting condition underwriting. This important development will likely accelerate employers exiting sponsorship of retiree health programs and, in many cases, adopting account-based solutions."
The Obama administration recently enacted a $5 billion reimbursement program aimed at bridging the gap to 2014. Under the provision, companies can receive an 80 percent reimbursement on claims incurred by early retirees and dependents between $15,000 and $90,000 over the course of a year. The program began last month and will end Jan. 1, 2014, but with limited funding and an estimated 76 percent of large employers planning to apply (according to a survey from Hewitt Associates), there's no telling when that $5 billion will be drained.
