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For years, employers, increasingly unable to afford the coverage, have stopped providing health care plans to their retired workers.
A Kaiser Family Foundation report issued last week noted that in 2015 just 23% of employers with at least 200 employees offered retiree health care coverage. That is down from 32% a decade earlier and a dramatic decline compared with the two-thirds of employers who provided the coverage in 1988.
Other surveys, looking just at employers coverage for Medicare-eligible retirees, also have found sharp declines.
For example, in 2014, just 16% of employers still offered coverage to Medicare-eligible retirees, a drop from 24% in 2005, according to a survey by a unit of the National Center for Health Statistics.
“Employer-sponsored retiree health coverage once played a key role in supplementing Medicare. Any way you slice it, this coverage is eroding,” Kaiser said in its report.
But those statistics, said John Barkett, director of health policy affairs at Willis Towers Watson P.L.C. in Washington, don't tell the full story.
While the employer move away from providing retiree health care coverage has been “well-documented,” another trend has not, Mr. Barkett said.
That trend: the move of employers to make available to retirees coverage through private exchanges, with employers offsetting part of the cost of coverage through contributions to health reimbursement arrangements, which retirees can apply toward the premiums in the exchange plan they select.
Indeed, a forthcoming Willis Towers Watson survey of several hundred employers found that one-third of respondents already have taken this approach for coverage for Medicare-eligible retirees, and two-thirds are considering doing so by 2018, Willis Towers Watson said.
The appeal of such an approach is simple. “It allows employers to make coverage available with predictable costs and in an affordable way,” Mr. Barkett said.
Several major employers, including The Kraft Heinz Co. and the Ohio Public Employees Retirement System, in the last year have adopted the approach.
The Catholic Archdiocese of Paterson in Clifton, New Jersey, said Thursday it will freeze its defined benefit pension plan, effective June 30, and set up a new defined contribution plan.