Magazine article Drug Topics

Retiree Benefits Decrease-What about Rx Coverage?

Magazine article Drug Topics

Retiree Benefits Decrease-What about Rx Coverage?

Article excerpt

Fewer and fewer companies are providing health-care benefits to their retirees as time goes by But the idea of covering those retirees' prescriptions continues to be discussed by plan sponsors, according to a new report issued by The Henry J. Kaiser Family Foundation.

Retiree Health Coverage: Recent Trends and Employer Perspectives on Future Benefits, a new report by The Hewitt Associates management consulting firm, found that many large employers say they would seriously consider a variety of strategies to trim retiree health costs in the next three to five years. Employer-sponsored retiree health coverage is the leading source of supplemental insurance for the Medicare population, providing benefits to 34% of all Medicare beneficiaries.

Overall, the prevalence of retiree health benefits sponsored by large employers declined from 80% in 1991 to 67% in 1998, reflecting a drop in the number of companies offering coverage and few newer companies adding it.

Still, statistics from the Health Care Financing Administration (HCFA) show more than 86% of those with access to employer-sponsored coverage have prescription drug coverage. Among large employers (1,000 or more employees) in the Hewitt database, that percentage is even higher; more than 95% of those employers provide Rx drug coverage.

"Drug benefits can either be provided as part of the medical plani.e., subject to the same deductible, coinsurance, and out-of-pocket limit-or through a separate drug card program with no deductible and co-pays of $5 for generics and $10-$15 for brand-name products. The latter approach is increasingly more common," according to the report's authors. "Large employers offering Medicare-risk HMOs on a group basis usually subsidize the offerings so that retirees in different parts of the country will have uniform co-pays and supplemental benefits, including prescription drug coverage. These employers typically negotiate and pay additional costs for prescription drug coverage without annual limits."

The data indicate that it costs $1,000-$2,000 per person to offer prescription coverage for Medicare-eligible retirees, with employers commonly paying 90% of that cost. Prescription drug expenditures for the 65-plus population represent 40% to 60% of their retiree plan cost. Utilization of prescription drugs is more than double that of the active employee population, the report said.

The report also includes findings from a new survey assessing how large employers might change their retiree benefit programs in the future, as well as reactions to the Clinton Administration's proposal to add a prescription drug benefit to Medicare. …

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