If we needed any additional validation for the fears people have about medical costs during retirement, it's come in the form of a Kaiser Family Foundation study on retiree health benefits.
They're disappearing.
And the ones that are left are shrinking in what they cover.
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According to the study, in 1988, 66 percent of large employers (those with 200+ employees) provided health coverage to their retirees. But in 2015, that percentage had shrunk to just 23 percent.
But wait, as they say; that's not all.
Firms that are still offering such benefits are employing a range of strategies to limit their liability for these costs, such as hard caps on their financial liability, a shift from a defined benefit to a defined contribution approach, and increases in premiums and cost-sharing requirements paid by retirees and their spouses.
In the last several years, the report added, some employers have elected to offer retiree benefits through contracts with Medicare Advantage plans and private health insurance exchanges.
The result is that the cost burden for health care has increasingly shifted to the retiree.
Five different national surveys, the study said, indicate that the share of seniors on Medicare with employer-sponsored retiree health coverage is shrinking.
While the surveys differ in their estimates of how many seniors are covered, even the survey providing the highest estimates of retiree coverage among people ages 65 and older on Medicare—the American Community Survey—indicates that the share declines from 31 percent in 2008 to 25 percent in 2014. In another of the surveys, the National Health Interview Survey, the share declines from 24 percent in 2005 to 16 percent in 2014.
This is not good news for current or prospective retirees, since it underscores how their hard-saved funds for retirement will likely dwindle quickly if health issues surface.
The study said, "A growing number of boomers are aging on to Medicare without the additional financial protection of an employer-subsidized retiree health plan. Some will shift on to traditional Medicare, without supplemental coverage, and face multiple deductibles and cost-sharing requirements when they seek medical care, unless they forego care due to costs."
That will likely drive an increase in Medigap coverage and Medicare Advantage enrollment, it said, as seniors try to limit out-of-pocket spending.
The study concluded, "Employer-sponsored retiree health coverage once played a key role in supplementing Medicare. Any way you slice it, this coverage is eroding."
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