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Employers Pocket Medicare Money, Cut Employee Benefits |
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Tuesday, 08 August 2006 |
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In a sophisticated version of the street corner “three-card monte” hustle, many employers are taking government money that was supposed to be used for retiree health care and putting it in their corporate pockets.
In the monte scam, the dealer shows you one card—say the queen of spades—and puts it face down on the table with two other cards. You bet your money that you can find the queen after he’s shuffled the cards around a few times. Of course, you never can get the right card, and he gets to keep your money.
So while employers are crying about health care costs, many of them are taking taxpayer money that was clearly marked to help pay for retiree health plans and shifting it around to cushion their bottom lines instead and leaving workers and retirees empty-handed.
The Labor Research Association (LRA) looked at several corporate surveys and found widespread use of subsidies provided under the Medicare Modernization Act and the final Medicare Part D regulations released in January 2005 for large employers to discourage them from eliminating private prescription coverage for retired workers. At the same time, a huge majority of the private-sector employers surveyed by the global business consultant Watson Wyatt Worldwide are planning to cut their retiree medical plans for current and future retirees over the next five years.
As of last year, only one-third of employers offered retiree health coverage for their current employees, down from about two-thirds in 1988, the Kaiser Family Foundation reports.
More than nine in 10 of U.S. employers plan to shift more of the burden for health care to employees in the next five years. Ninety-five percent of the companies in the Watson Wyatt survey plan to place additional restrictions on their health care benefits for future retirees over the next five years, such as increasing employee contributions or tightening eligibility for care.
Similarly, more than nine in 10 (93 percent) expect to place more restrictions on current retirees. Fourteen percent of employers plan to eliminate the benefit entirely for future retirees, and 6 percent plan to eliminate plans for current retirees over 65.
It gets worse! Another survey from Towers Perrin shows 82 percent of private-sector companies receiving the federal subsidy have used it to lower their costs, while only 14 percent have used it to either reduce retirees’ costs or shared the cost savings with retirees. For example, IBM in its 2005 annual report estimated it would receive a $400 million subsidy during the six-year period beginning in 2006. Yet, in the first week of 2006, IBM, along with Sears, Verizon Communications and more than 67 other companies, froze or closed their defined-benefit plans to newly hired workers.
This cutback in retiree benefits is just part of an overall trend in which corporations are shifting medical costs to employees, according to the LRA analysis, which points to several survey results that indicate the practice is growing:
· Another Watson Wyatt survey found that nearly one-third of employers (32 percent) in the next one to two years will start encouraging workers to use health care services “wisely,” while slightly less (30 percent) say they plan to increase accountability to ensure employees manage their own health. Both steps are commonly used to pave the wave for “consumer-directed” health plans, LRA says. So-called consumer-driven health plans in fact mean an end to traditional employer-paid health plans and shift most costs and risks to employees, according to LRA.
· According to a new survey of nearly 3,000 companies by Mercer HR Consulting, 22 percent of the largest companies—those with 20,000 or more employees— already have installed consumer-driven health plans. These plans typically are introduced as one health plan option, LRA notes, often with the goal of phasing out other options and shifting entirely to the consumer-driven plan.
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