Early Retiree Health Insurance

crawfod

While I realize the national trend is for employers to shy away from offering older workers early retirement health insurance, we are a City government in Tennessee, and we currently do not offer such a benefit (besides their legal rights to COBRA which is too expensive for most of them, so they keep working). We have a number of employees between 60-65 that would love to retire, if they could only have some help with health insurance until Medicare kicks in. Most of them understand to have a lifetime plan would be impractical in today's health world. I already can think of numerous pros and cons to such a plan, but my question is if there are any sources out there, besides the $20K consultants, that are available to guide me through the decision making process. If I overlook even one or two subtle issues, it could all blow up. I'm partly joking about the consultants, but truth is I would have a hard time going to my City Council asking for $20K for such a project when budgets are tight. But I would like to at least do the research for our employees. Any ideas?

Margaret Morford

[font size="1" color="#FF0000"]LAST EDITED ON 04-17-03 AT 12:27PM (CST)[/font][p]I'm a consultant (not the 20K kind!), but I'm certainly willing help. There are three reasons most companies don't offer this anymore. First, your insurance rates are going to increase because you are now offering benefits to an expanded employee population, who are at a more expense medical time in their lives. (The older I get, the more I know this to be true. Lots goes wrong with us after 40!) Second, this group now suddenly has time to go have medical care that they have put off for a long time. And third, and probably most important, there was a FASB (Accounting standards) ruling a few years back that retiree medical now has to be carried on the books as a liability, for which companies need to accrue. This caused company balance sheets to suddenly be in the red and tied up a lot of money in accruals.

To research this, I'd call your insurance carrier and ask what it will do to your rates. Second, I'd go talk to your CFO and ask about what would happen to the balance sheet if you did this. I think you'll find you won't want to do this. Many of the large employers that have offered this in the past are still trying to get out from under it. (The big car makers have continually tried to get the federal government to step in and accept this responsibility from them to stay in business).

Hope that helps.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

Hunter1

Margaret made some very good points, and I'm afraid I can't point you in the direction of good resources, but here's another problem to consider: The EEOC and some case law considers providing insurance up to age 65 or Medicare eligibility age to be age discrimination. (A person who retires at age 62 [younger] receives more benefit than one who retires at age 64 [older]). Just another reason not to do it. (Do as I say, not as I do : )