The impact of health care reform on older workers, retirees and employers

The Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 impacts everyone who uses or pays for the health care system. Among the new law's effects will be changes in older workers' health care choices as they transition from full-time employees to part-time work or other jobs and, ultimately, to retirement, and the retiree health benefit choices facing their employers. This article reviews the major issues surrounding these changes, including those affecting retiree health benefits, benefits for Medicare-eligible retirees and health care options for older Americans not yet eligible for Medicare. The authors conclude that although employers will be reacting in 2010 and 2011 with regard to some issues surrounding FASB ASC 715-60 and the early retiree reinsurance program, employers should consider waiting to make major changes until regulations are issued and the health plans for active employees have been fully vetted.     

Communicating the need for additional savings in the face of retiree health benefit cutbacks.

In preparing for retirement, employees need to consider not only their pension benefits but also the challenge of financing their retirement health care needs. Various trends evolving in our society indicate that future retirees will be increasingly dependent on their own retirement savings. Evidence suggests that employees are not fully aware of the significance of health costs in retirement and must be educated to the need to save for retiree health care expenses. This article discusses the issues of Medicare reduction and retiree health benefit cutbacks and the relative communication and education challenges such issues pose to employers.     

Retiree health benefits in the United States: a strategic critical management review

This article provides a critical review of studies associated with retiree health benefits in the United States. An attempt is made to determine if logical conclusions or trends could be identified regarding this issue of health care policy debate. The forms of retiree health benefits are covered, as is a discussion of Medigap policies and insurance coverage for the elderly. Employer-sponsored retiree benefits and the effects of supplemental coverage on the use of services are also reviewed. Lastly, a discussion and conclusion regarding this research agenda is presented with a critical analysis of the health care policy management debate for the future.     

Retiree medical--round 2

The second round of changes resulting from FAS 106 will be less dramatic than the first. But employers can anticipate that overall retiree health care costs will be reduced, averting the need to increase pensions or other retiree benefits. A fixed dollar benefit design will justify a lower accounting cost.     

Can managed care reduce employers' retiree medical liability?

The Financial Accounting Standards Board (FASB) has forced U.S. companies to look squarely at their current retiree health obligations and their future commitments. Accounting Statement No. 106 (FAS 106) requires employers to accrue liabilities for retiree health benefits during employees' active service, rather than record the costs as benefits are paid. Employers are scrambling to find ways to reduce the statement's effect on corporate balance sheets. While managed health care has been increasingly employed to control benefit costs in active employee health plans, it has not been as popular in retiree plans. This article reviews important demographic and health trends in the retiree population and summarizes employers' early responses to FAS 106. It explores why managed health care has thus far played a limited role in reducing employers' postretirement medical liability, and offers insight into how that role could be increased in the future.     

Retiree health care benefits: new rules, new strategies.

Two recent court decisions in a retiree health care benefits age discrimination case are likely to bring changes to employer-sponsored retiree health care. After reviewing the cases and how the Equal Employment Opportunity Commission has responded to them, this article discusses employer implications. Although the court decisions add complexity to retiree health plan design, they also provide employers with the valuable opportunity to analyze the match between their retiree health plans and business needs.     

Retiree health care costs: a workable plan

Thirty-three million retired Americans have taken for granted the warm security that health care would be provided throughout their retirement--by Medicare, by their employers, certainly by someone, because it must be an inalienable right. As the financial aspects of retiree health care are examined, however, it is important to keep in mind who will pay for it and how much we are willing to spend. This raises three important questions: Are we ready to spend that much? Is that sum enough to produce the system we want? Will we get our money's worth or just start another round of health care inflation? This article suggests two programs, one for addressing this staggering problem and another to deal with the financing of retiree health care.     

A sign of the times.

Pressure placed on employers to enhance the bottom line comes from a multitude of changes in the marketplace and has resulted in employers seeking to limit their liabilities and expenses for retiree medical care. To address retiree medical issues, employers have adapted a number of strategies that are presented in this article. These include eliminating or modifying benefits, using a defined contribution approach, capping subsidies and enrolling retirees in Medicare HMOs.     

The future of therapeutics in the north

Health-care systems occupy from 6% up to 15% of developed countries' GDPs. Therapeutics, particularly hospital care, occupy the bulk of these expenditures, despite their focus on dealing with disease after it arises. In the 21st century health-care systems will focus on health gains. Therapeutics will have broadened to encompass prevention and treatment, and will be focused on each individual's unique biological, psychological and social needs. Major killers, most particularly heart disease and cancer, will be far more preventable or curable, because of changes in therapeutic paradigms to more holistic approaches as well as important biomedical breakthroughs. There are a variety of negative possibilities, including continued preeminence of the medical model, growing costs, increased inequality in access, and greater poverty and social disintegration. The movement to therapeutics more focused on health gains will be accelerated by a variety of trends, particularly the development by communities in the USA and many other countries of shared visions that guide the evolution of health care in these directions.     

Manufacturing firms' decisions regarding retiree health insurance

The trend for employers to discontinue offering retiree health insurance has profound implications for a large and growing share of the U.S. older population. The authors explore factors related to the firm's decision to offer and contribute to retiree health insurance using data from manufacturing firms. Their findings indicate that while firm characteristics, such as size and age, affect the probability that a firm offers retiree health insurance, employer contributions to this benefit are significantly related to the firm's financial performance and the alternative insurance options available in the market. The article concludes with a brief discussion of policy-related measures with potentially important implications for the future of retiree health benefits.     

Accounting as discursive construction: The relationship between statement of financial accounting standards no. 106 and the dismantling of retiree health benefits

This study explores reductions in benefits that occurred coincident with the passage of Statement of Financial Accounting Standard 106 requiring companies to accrue a liability for unfunded retiree health benefits. Congressional hearings and the business press reveal two competing discursive constructions of the retiree health benefits crisis. The first portrayed them as moral obligations that firms were attempting to avoid, the second as unexpected liabilities threatening corporations. Drawing on the work of Skocpol (1992), Weber (1949, 1978) and Burawoy (1983, 1985), we argue that characterizing these benefits primarily as accounting liabilities reinforced the second construction, facilitating corporate efforts to roll back retiree health coverage.     

Health systems futures: The challenges of technology,prevention and insurance

This article argues that the futures of health systems depend on how countries address three wider challenges that include: (a) the adoption of health innovations and quality improvements, (b) responses to new non-communicable and preventable global diseases, as well as (c) adjusting financial models to current insurance constraints. Future trends point towards an increasing dependence on productive quality improvements, the personalisation of health care and the organisation of delivery and finance to take advantage of existing knowledge. Prevention, and disease avoidance, particularly that of non-communicable diseases, will aim to reduce pressure on “care components” of the health system whilst global control of communicable risks will become apparent. Finally, trends suggest an increase in patient participation and personalisation of insurance contracts will help to realign risk sharing with cost containment and financial sustainability. Other potential challenges such as ageing are regarded as second order issues to be addressed through these aforementioned future trends.     

Disinvestment in health— the challenges facing general practitioner (GP) commissioners

The economic downturn is placing increasing pressure on the financing of health care. For many health care providers, this means difficult decisions need to be made over what will and will not be funded. The NHS has not typically been good at decommissioning and disinvesting in services. The recent proposed changes to the commissioning function will mean that clinicians will have a leading role in population-based priority-setting. This could well enhance the quest for legitimacy in relation to difficult resource allocation decisions. However, it is unlikely that GPs alone will be able to meet the challenges ahead, and reasonable disinvestment decisions will require GPs to engage with a number of stakeholders including government, interest groups and the wider civic society.     

Decision time for retiree medical accounting

An employer's initial response to the new accounting rules for employer-sponsored retiree medical plans can irreversibly shape the retiree medical costs and liabilities that will emerge over the next several decades.     

Shifting responsibility to workers: the future of retirement adequacy in the United States

While many 401(k) participants at large companies can expect replacement of nearly 100% of preretirement income, not all workers participate in their 401(k) plan. Moreover, the authors show that even among participants, the extent of retirement preparedness depends on defined benefit (DB) plan coverage and retiree medical benefit generosity. Given recent trends in the elimination of DB plans and retiree medical subsidies and the voluntary nature of 401(k) participation, retirement income responsibility is increasingly shifting to workers. The authors discuss how employers might help workers meet their retirement income needs in this changing environment.     

Accuracy of Long-Range Actuarial Projections of Health Care Costs

The Office of the Actuary, mandated to provide projections of future medical spending for use by the U.S. Medicare and Medicaid programs, publishes forecasts that have been widely used by private firms and government budget officials as a baseline for expected long-run premium trends and to estimate liabilities for retiree health benefits. Although these projections have been made publicly available since 1986, they have not yet been subject to systematic evaluation by an external reviewer. This article develops a method for assessment of both short- and long-run accuracy and applies it to the 17 sets of projections made public over the last 25 years. The more recent set of projections (1998–2010) incorporating lagged macroeconomic effects appear to be more accurate than the older (1986–1995) projections that relied more heavily on demographic cost of illness trends. The average annualized error of the forecasts is approximately 0.5–1% per year, whether assessed over a span of one, two, or 10 years. Projecting “excess” growth in health spending (the rise in the share of wages or GDP) tends to be more accurate than forecasting nominal or real spending per capita.