Summary: Employer-provided insurance for retirees has experienced a slow but persistent decline since the early 1990s. Rising health care costs have spurred companies to find ways to control their benefit expenditures, including eliminating retiree coverage and increasing cost sharing. Moreover, a new financial accounting standard developed in the late 1980s has changed employers' perceptions of retiree health benefits and may have served as a catalyst to reduce retiree coverage. The Health Insurance Portability and Accountability Act of 1996 mandates continued access to health insurance for persons losing group coverage. The legislation does not, however, guarantee that the continued coverage will be affordable. Because state laws governing the operation of the individual market can vary, the premiums faced by early retirees vary substantially. Moreover, considering that large companies typically pay 70 to 80 percent of the premium, costs in the individual market may come as a rude awakening for early retirees. Persons who are already retired when a company terminates coverage are not eligible to temporarily continue that firm's health plan at their own expenses. COBRA coverage is only available to active employees who quit or retire or are fired or laid off. To address this potential gap in coverage when a former employer unexpectedly terminates health insurance, Congress and the President have proposed allowing affected retirees to purchase continuation coverage at a cost that reflects their higher utilization of services until they become eligible for Medicare.
