News & Information

 

FEATURED PRODUCT

5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.

Learn More »

CCH® BENEFITS — 4/23/08

Staying On The Job May Prevent Erosion Of Health Benefits For Employees Aged 55 To 64

From Spencer's Benefits Reports: At a Senate Special Committee on Aging hearing on April 3, Sen. Ron Wyden (Ore.), who was the temporary chair for the hearing, said that Americans between 55 and 64 increasingly lack health insurance coverage. Between 2000 and 2007 an estimated 9% fewer employers offered health care coverage for their workers. Often people in this age group earn too much to qualify for Medicaid, but are too young to qualify for Medicare, he said.

One legislative proposal would help bridge the three-year coverage gap between age 62, a common retirement age, and age 65, the age of Medicare eligibility: The Health Care and Training for Older Workers Act (S. 708) would provide COBRA coverage for this 36-month period. However, the bill is “just one piece of a much larger puzzle,” said Senate Special Committee on Aging chair Herb Kohl (Wis.). “Health care reform in our country is long overdue,” he asserted.

Fifty-seven-year-old Lee Anne Fitzpatrick, who has pre-existing conditions from a childhood accident, said it has been difficult to find insurance. “It baffles me that, in a country of such opportunity and wealth, so many of us live in fear of losing our financial security due to the lack of access to health insurance,” she said in written testimony.

Ben Lindner, a small business owner, said his company spends $5.19 per hour per person in health care costs. “From a national perspective I believe that this level of cost constitutes a significant disincentive to employing mature workers,” he said. Mr. Lindner added that mature workers raise the average age and corresponding health care costs of a company’s work force.

Little Erosion In Coverage?

However, Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute (EBRI) in Washington, D.C., speaking on his own behalf, said that there has been little erosion of coverage for those between the ages of 55 and 64.

Mr. Fronstin explained that older workers and individuals are particularly vulnerable if they were to lose coverage, adding that they might lose coverage because of job displacement and might be unable to afford or obtain health insurance on their own due to their age and/or health status. Furthermore, he said, retirees are less likely than in the past to have access to retiree health benefits since employers have been cutting back on the benefit.

Despite these vulnerabilities, Mr. Fronstin said, these individuals are the least likely age group among adults to be uninsured. In 2006, 12.7% of individuals aged 55 to 64 were uninsured. “This is lower than the overall uninsured rate of 17.9% among persons under age 65, and lower than all other age groups except for children,” he concluded.

Mr. Fronstin said that it might be surprising that the percentage of retirees ages 55–64 with health care benefits through a former employer have not fallen more than they have, “given the erosion in availability of retiree health benefits.” There might be a number of reasons for this. First, said Mr. Fronstin, “There is a strong link between the availability of retiree health benefits and the decision to retire early. Workers often remain in the labor force longer than expected to maintain health insurance. EBRI’s Health Confidence Survey (HCS) has found that 30% of workers expecting to retire before becoming eligible for Medicare would not do so if they did not receive retiree health benefits.

“The declining availability of retiree health benefits may in part explain the rising labor force participation rate among individuals 55–64. Between 1996 and 2006, the labor force participation rate for men increased from 67% to 69.6%, while for women it increased from 49.6% to 58.2%. The percentage of retirees with health coverage from a former employer may not be declining as quickly as the availability of retiree health benefits because workers without access to this benefit may be remaining in the labor force longer than workers with access to retiree health coverage.”

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

Visit our News Library to read more news stories.