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Employers to Keep Retirees' Rx Coverage

Most Say Medicare Drug Plans Won't End Their Benefits

WebMD Health News

Dec. 8, 2005 -- Most retirees who already have prescription coverage through a former employer won't be forced to choose a Medicare drug plan over the next few months, according to a report released Wednesday.

A survey of 300 large employers shows that nine in 10 plan to keep offering drug coverage to retirees aged 65 and older even once Medicare's Part D benefit kicks in next month.

That could prevent a lot of inconvenience for many of the 12 million U.S. retirees who already get drug coverage through their former jobs. It could also bode well for Medicare and the Bush administration, who have been suffering withering criticism that Part D has too many plans and is too complex for most seniors to make an informed choice.

"We think this is mostly good news for retirees," says Tricia Neuman, vice president of the Henry J. Kaiser Family Foundation, a nonprofit group that sponsored the survey.

Critics Complain

Still, Neuman and other analysts warn that employers' health costs continue a rapid rise and that up to half are not committed to continuing to offer drug benefits in the future.

The drug plan's first enrollment period began Nov. 15 and lasts through May 15, 2006. The process has sparked complaints from many seniors who are being asked to choose from more than 40 different plans in most states.

Employers who already offer prescription benefits to retirees can take a government subsidy to keep offering their plans as long as the plans are at least equivalent to what Medicare offers. That was supposed to spare many seniors the trouble of leaving their existing coverage to hunt for another prescription plan.

Some analysts worried that many employers faced with rising health costs would use Part D as an excuse to drop coverage. But only 9% plan to take that route next year, according to the survey.

That could be a relief for millions of covered retirees, at least for now.

"You may not have to choose among 40 different drug plans. You may be able to just stay where you are today," says Frank McCardle, an analyst with the Hewitt Associates research firm, which conducted the study with Kaiser.

Future Uncertain

But McCardle warns that many companies continue to face mounting costs and may not stick with drug coverage in years to come. Medicare prescription subsidies will save firms just 7% savings on their overall retiree health care costs next year. The savings are outpaced by the 10.3% average increase in retiree health costs companies saw this year.

While 82% of firms say they are likely to continue offering drug coverage 2007, only half say that was likely by 2010.

"Employers are going to continue to re-evaluate this," he says.

Even companies that keep their coverage are not necessarily a safe bet for retirees. Six in 10 employers say that retirees who leave now to take Medicare-sponsored drug coverage won't be able to get their coverage back if they change their minds later, according to the survey.

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