The Implications of Declining Retiree Health Insurance

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The Implications of Declining Retiree Health
Insurance

• Courtney Monk and Alicia H. Munnell
• Center for Retirement Research at Boston College
• 11th Annual Joint Conference of the Retirement
  Research Consortium
• The National Press Club
• Washington, DC
• August 11, 2009

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Access to retiree health insurance (RHI) is
falling, and its cost is rising.
Percent of Large Employers Offering RHI to Active
Employees, Selected Years, 1988-2006
Median Monthly RHI Premiums, 2002-2006 (2006
Dollars)
Sources Gary Claxton, Bianca DiJulio, Benjamin
Finder, and Marian Jarlenski. Employer Health
Benefits 2008 An Annual Survey, 2008. Menlo
Park, CA Kaiser Family Foundation and authors
calculations from the University of Michigan.
Health and Retirement Study (HRS), 2002-2006. Ann
Arbor, MI.
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For pre-Medicare individuals, RHI is an important
source of coverage.
Sources of Health Insurance, Age 55-64, 2006
Employer-sponsored health insurance, 55
Source Authors calculations from the 2006 HRS.
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What would happen to young retirees if RHI were
no longer available?

• Would individuals instead choose to work longer?
• For those who still decide to retire before age
  65, what health insurance options would they
  have?

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Access to RHI affects the decision to retire.
Marginal Effect of the RHI Offer on the
Probability of Retirement, Married Individuals
Aged 55-64, 1998-2006
RHI offer age
Statistically significant
Not statistically significant
Source Authors calculations from the 1998-2006
HRS.
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The withdrawal of RHI would cause some people to
delay retirement.
Average Conditional Retirement Rate for Those
with RHI Access, 1998-2006
Source Authors calculations from the 1998-2006
HRS probabilities weighted by gender and marital
status.
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But a large group will still choose to retire and
will lack affordable health insurance.
Workers age 55-64 facing RHI withdrawal
82
18
Keep working
Retire
13
5
Access to insurance from spouses current employer
No employer-sponsored alternative
Source Authors calculations from the 1998-2006
HRS.
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For people 65 and over, RHI is an important
source of supplemental coverage.
Source of Coverage, Age 65, 2006
Employer-sponsored (working), 7
Source Authors calculations from the 2006 HRS.
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RHI is more generous than other supplemental
coverage.
Source Authors analysis.
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So what would happen if RHI were no longer
available to Medicare beneficiaries?

• What kind of supplemental coverage would people
  choose, if any?
• How would their out-of-pocket spending change?
• How would their utilization change?
• Would their health change?

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We can predict the relative likelihood of
choosing an alternative to RHI.
Relative Risk Ratios, Multinomial Logit Results,
1998-2006 (Base Category Basic Medicare)


Medicare HMO Medigap
Not statistically significant. Source Authors
calculations from the 1998-2006 HRS.
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About half of RHI holders would select into
Medigap.
Predicted Insurance Choice for RHI Holders from
the Multinomial Logit, 2006
RHI is withdrawn
48
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29
Basic Medicare
Medicare HMO
Medigap
Source Authors calculations from the 2006 HRS.
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Total spending would fall slightly on average,
but OOP would rise for most.
Mean 2-Year Spending For RHI Holders Before and
After Switching, 2006
Source Authors calculations from the 2006 HRS.
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But OOP changes over an individuals remaining
lifespan would be small.
Expected PDV of the change in OOP at age 65
Basic Medicare
?16,441
RHI is withdrawn
Medicare HMO
?290
Medigap
?6,167
Source Authors calculations from the 2006 HRS
CMS real medical cost growth projections.
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Utilization would generally decrease.
Percent Change in Utilization After Taking Up New
Insurance, 2006




Basic Medicare Medicare HMO Medigap
Not statistically significant. Source Authors
calculations from the 2004-2006 HRS.
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Elimination of RHI would be unlikely to affect
Medicare beneficiaries health.

• Prior health is the key driver of current health.
  
• A change from one type of insurance to another is
  unlikely to affect health.

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Conclusion

• Without RHI, some 55-64 year olds would delay
  retirement to retain their health insurance
  coverage.
• Most would still retire early but would likely
  lack secure coverage.
• Those over 65 would have to spend somewhat more
  for Medigap, but Medicare would still protect
  health outcomes.

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