A recent analysis of health reform legislation by the Employee Benefits Research Institute found that the proposals will have a mixed impact on retiree health benefits. Reinsurance provisions would help strengthen health benefits in the short-term, but several issues could drive employers to drop coverage.

  • Reinsurance for early retirees. A temporary reinsurance program that would help retirees over 55, but ineligible for Medicare would lead employers to continue offering benefits until the health insurance exchange is fully operational, according to EBRI; once that's in effect, employers would drop health benefits for early retirees and retirees will depend less on former employers for coverage.
  • Medicare drug benefits. The House bill eliminates the Medicare coverage gap in 2019. Both bills reduce the gap by $500 and provide a 50 percent discount, making the program more valuable to retirees than employer-sponsored drug benefits.
  • Tax treatment of employer subsidies. Subsidies provided to employers who offer prescription drug coverage through retiree health benefits programs aren't taxed as income, but both bills will change that. The increase in the cost of drug benefits for retirees, as well as employers' increased FAS 106 liability would make Medicare drug coverage even more attractive from an employer's perspective, EBRI writes.
  • Postretirement benefit changes. Once a worker retires, the House bill will protect them from changes to their benefits. As a result of that provision, employers could cap their contributions or cut health benefits to active workers to protect retiree benefits. They could also drop retiree benefits altogether to protect themselves from being locked into a permanent benefit.

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