The Implications of Declining Retiree Health Insurance

TitleThe Implications of Declining Retiree Health Insurance
Publication TypeReport
Year of Publication2009
AuthorsMonk, C, Munnell, AH
Series TitleCenter for Retirement Research at Boston College Working Papers
Document NumberWP#2009-15
InstitutionCenter for Retirement Research at Boston College
Call Numbernewpubs20091202_wp_2009-15
KeywordsEmployment and Labor Force, Medicare/Medicaid/Health Insurance, Retirement Planning and Satisfaction

A large number of retirees have employer-sponsored retiree health insurance (RHI). While RHI is a common source of supplemental coverage for Medicare beneficiaries, it is also the only affordable source of health insurance for many retirees under age 65 who have no access to Medicare. However, employers are scaling back their RHI benefits in response to rising health costs and changes in accounting rules, by either eliminating benefits which shifts costs to retirees, or tightening vesting requirements. Using data from the Health and Retirement Study, this paper examines the potential consequences of eliminating RHI for both pre-Medicare and Medicare-eligible retirees. For younger retirees the likely primary response is to work longer, and we find that number of workers age 55 to 64 would increase by 7 percent, as some of those who have their access to RHI eliminated would work rather than retire. Of those who still choose to retire, most lack any employer-sponsored health insurance option and would need to find an alternative source of coverage or go uninsured. For Medicare beneficiaries over 65, we estimate that about three quarters would replace RHI with another form of supplemental coverage. This shift would slightly reduce total spending and utilization for individuals who choose basic Medicare or a Medicare HMO as opposed to a Medigap plan, but health outcomes would probably be unaffected no matter which supplemental option is chosen. In short, a full elimination of RHI would primarily impact early retirees who must face the cost of much more expensive insurance or of financing illness without insurance. Policymakers may want to consider encouraging insurers to step in to provide more affordable plans for these early pre-Medicare retirees

Endnote Keywords

Employer Health Costs/RETIREMENT/Health Insurance Coverage

Endnote ID


Citation Key5752