Several states and communities are moving to provide universal health coverage for their residents, but a federal law is blocking their efforts.
Many of the proposals require employers either to offer health coverage themselves or pay into a public fund to help cover the uninsured.
'NIGHTMARE': Businesses fight forced payments for universal health care
Some employers say that conflicts with a federal law that bars states from requiring or regulating employer-provided benefits such as health coverage. The law, which protects private-sector companies from having to meet a patchwork of state and local demands, is supported by businesses.
The dispute has set off a legal battle pitting lawmakers against employers. Its resolution could determine how far state and local lawmakers can go with their plans to cover the uninsured.
"There are people who believe that but for (this law), we would be much farther along in knowing what works in terms of health reform," says Phyllis Borzi, a George Washington University health policy professor.
Greg Scandlen, president of Consumers for Health Care Choices, says the law shields businesses from varying rules. "The idea that the employer is required to provide coverage or pay a fee will be thrown out in a heartbeat" in court, says Scandlen, whose group advocates less government regulation of health care.
An early legal test of these plans is taking place in San Francisco, the first city to offer universal coverage to its residents. A group of restaurant owners sued the city in 2006, saying the law violates the federal Employee Retirement Income and Security Act (ERISA).
In December, a lower court judge sided with employers. But last week, an appeals court allowed San Francisco to proceed temporarily with its program and begin charging employers a fee, ruling that the city has a "strong likelihood of prevailing" in its appeal.
California, Colorado, Michigan and Minnesota have proposals pending that rely on partial funding by employers. The lower court ruling "raises doubt with regard to all of the state health reform proposals," says Atlanta attorney John Hickman, an expert on the federal law.
The 1974 law poses the biggest challenge in California, where Gov. Arnold Schwarzenegger has spent more than a year pushing a $14 billion health plan. His proposal includes a payroll tax on employers who don't offer coverage.
"We believe the ruling (of the lower court) is not insurmountable," says Frank Furtek, chief counsel at the California Health and Human Services Agency.
If the 9th U.S. Circuit Court of Appeals ultimately rules in the city's favor, the case may end up before the U.S. Supreme Court, Borzi says.
That's because last January, the 4th U.S. Circuit Court of Appeals reached the opposite conclusion over a Maryland law. That law charged very large employers a fee if they did not spend 8% of payroll on health care, essentially affecting only Wal-Mart. The appeals court ruled the measure violated federal law.
If the appeals courts disagree, "it sets up a conflict, which is the classic pathway to having the Supreme Court resolve it," Borzi says. A similar law in Suffolk County, N.Y., was rejected by a lower court in July; the county decided not to appeal.
Massachusetts, the only state to require all residents to carry insurance, sets a $295 per worker annual fee on employers who don't offer coverage. The fee's small size and early support from business are credited with preventing a legal challenge.
By Julie Appleby
As published on USAtoday.com
http://yahoo.usatoday.com/news/nation/2008-01-16-health_N.htm?csp=1&POE=click-refer
Denny Brown, a computer analyst in West Chester, Ohio, will turn 62 in August and hopes to retire by the end of the year. Financially, he's in good shape: He has a pension from a previous employer, profit-sharing through his current job and substantial savings. An amateur photographer, avid traveler and Civil War buff, he's eager to start the next chapter in his life. "I have a lot of interests," he says, "and I'm tired of working."
There's just one obstacle on the road to Brown's retirement adventure: health insurance. Brown, along with 2.8 million of the oldest boomers, will be eligible for Social Security benefits this year, but he won't be eligible for Medicare until he turns 65.
DAY 1: Boomers' eagerness to retire could cost them
YOUR MONEY: Husbands should consider delaying Social Security benefits
DAY 3: Do older boomers have a financial edge?
DAY 4: Avoid pitfalls in managing your retirement fund
DAY 5: Reverse mortgages aren't for everyone
Finding a way to bridge that gap — eligible for Social Security but not for Medicare — will be the hardest and costliest challenge for many of the boomers who want to retire early or are forced out of their jobs. For Brown and his wife, Judy, who's already retired, figuring out how to pay for medical coverage "is absolutely our biggest concern."
FIND MORE STORIES IN: Congress | Ohio | Missouri | Social Security | Medicare | Brown | Civil War | Springfield | Kaiser Family Foundation | Susan | West Chester | Judy | Caterpillar | Finding | Education Trust | Avoid | Hermes | Academy of Actuaries | Reverse | Health Research | David Certner | eHealthInsurance
Americans are working longer, but most of them still retire before they're eligible for Medicare. In 2006, the median retirement age for men was 64, up from 63.1 in 2001, according to the American Academy of Actuaries. For women, the median age was 61.9 in 2006, up from 61.1 in 2001.
In the past, retirees could often count on their employers to provide health insurance until Medicare kicked in, or sometimes even after they were eligible for Medicare. But in 2007, only a third of large employers offered retiree health insurance, down from 66% in 1988, according to a survey by the Kaiser Family Foundation and the Health Research & Education Trust. Only 5% of employers with fewer than 200 employees offered retiree health insurance last year.
Those companies that continue to provide retiree health insurance are reducing benefits or requiring retirees to pay more for their coverage. In July, a federal judge granted class-action status to lawsuits against Caterpillar by retired employees and spouses. AARP has joined the lawsuit on behalf of the retirees, who claim that Caterpillar (CAT) reneged on a promise to provide free health coverage for them and their spouses for life. (Caterpillar contends the union representing the retirees approved contracts scaling back the coverage.)
The millions who will retire early without company-provided health insurance may need to buy a health care policy to last them until Medicare kicks in at age 65. Unfortunately, individual policies for people in their 60s can be hugely expensive, with premiums topping $900 a month for family coverage. And those in poor health might be unable to find a policy at any price.
Some early retirees who lack employer coverage "are just hanging on until they're eligible for Medicare," says David Certner, director of federal affairs for AARP. "Either they can't afford (health insurance), or they can't get it. They're hoping nothing happens before they hit age 65." About 16% of individuals 50 to 64 are uninsured, AARP says.
Mike Hermes, a mortgage lender in Springfield, Mo., who will turn 62 in October, would also like to retire this year. But because he won't have retiree health insurance, he might have to work longer. His wife, Susan, had a heart stent inserted last year, Hermes says, which means she's probably not eligible for an individual insurance policy. Even if they could get coverage, he adds, private insurance is "ridiculously expensive."
"I wish Congress would consider letting people buy into Medicare," he says. Most boomers, he believes, would like to retire at 62, "but insurance is keeping a lot of us from doing that."
Since Congress isn't likely to lower the eligibility age for Medicare, those who plan to retire before 65 should review their options before they hand in their resignations, warns Cheryl Matheis, director of health strategies for AARP. Those options include:
Your spouse's plan
If your spouse is still working at a job that provides health coverage, that's probably the best deal you're going to get, Matheis says. Your spouse will pay a higher premium for family coverage, but it will still be cheaper, and provide better coverage, than an individual policy bought from an insurer.
In 2007, the average employee's contribution for family health insurance coverage was $273 a month, says the Kaiser/HRET Employer Health Benefits Survey. In the private market, a healthy 62-year-old would have to accept a $5,000 deductible to find a policy with comparable premiums, says eHealthInsurance, an online market for individual insurance. Premiums for individual policies with no deductibles exceed $600 a month.
Before retiring, make sure your spouse's plan offers family coverage. Some plans won't let participants add a relative until open enrollment season, typically in November or December. If that's the case, you might need to postpone your retirement until your spouse can re-enroll and add you to the plan, Matheis says.
COBRA
The Consolidated Omnibus Budget Reconciliation Act lets former employees and their dependents continue their employer's group coverage for up to 18 months. If you retired at age 63½, for instance, you could use COBRA to bridge the gap until you're eligible for Medicare at 65.
The biggest advantage to COBRA? It's guaranteed. Your former employer's insurer can't refuse to cover you, even if you have a chronic medical condition. That makes COBRA an attractive option for retirees who have serious health problems and want to continue their current coverage.
The biggest drawback: COBRA is expensive. Ordinarily, employers cover 70% or more of an employee's health insurance premium. With COBRA, you'll have to pay the entire premium — plus administrative costs. Based on 2007 average premiums, that means a former worker would have to pay more than $373 a month for individual coverage and more than $1,008 a month for family coverage.
Still, COBRA "is probably still going to be a better deal than what you can get on the open market," Matheis says. "It's still group coverage purchased at group rates, and you're automatically guaranteed to get it."
Your employer's health insurance
Most companies no longer pay for retiree health insurance. But some of them let retired workers buy health insurance through the company plan. If this option is available, your employer may subsidize part of your premiums. Even if it doesn't, you'll still enjoy group rates, Matheis says. In either case, this option will often be cheaper than what you could buy on the open market. And you'll automatically be eligible for coverage.
Guy Colson, 61, of Hudson, Fla., confronted the health care coverage gap after he took a buyout package from IBM (IBM) 2½ years ago. Colson, a retired chief petty officer for the Navy Reserves, says his "saving grace" was the Defense Department's Tricare plan, available for active-duty and retired service members. The plan, which provides coverage for Colson and his wife, costs $460 a year. That compares with more than $940 a month if he'd bought IBM's retiree health insurance.
Retiring before age 65, he says, "can be a great challenge if you don't have a medical option."
Membership organizations
If you belong to any professional organizations, see if they offer insurance policies for members. Because these are group plans, the premiums may be lower than what you'd pay for an individual policy bought on your own.
A private plan
Insurers are developing products for the growing population of retired boomers who need coverage until they're eligible for Medicare. But make no mistake: These policies can be expensive, especially if you're on medication, are overweight or have a chronic health condition, says John Wider, vice president of health products and services for AARP Services.
Many retirees drop their individual policies once they're eligible for Medicare, Wider says. That makes them unprofitable for insurers, because they may not pay high enough premiums to cover their health care claims.
Despite these drawbacks, several insurers have introduced products targeted at early retirees. Last spring, Humana launched an individual policy geared for early retirees. Aetna and AARP plan to offer individual insurance policies to AARP members ages 50 to 64, starting early this year. WellPoint also plans to introduce a policy targeted at early retirees.
One reason for the interest: Insurers hope the retirees will still buy their products, such as supplemental insurance, even after they're eligible for Medicare.
People who say insurers don't want to insure people in their 60s "couldn't be further from the truth," says Jude Thompson, senior vice president at WellPoint. "If we don't address this segment, we're really walking away from the most loyal customers you can have."
Some policies charge premiums as low as $200 a month for individuals who are in good health and willing to pay a high deductible. But even with the expanding array of products, many early retirees will find it hard to find affordable health insurance, particularly if they have health problems.
Even if you can afford health insurance, you risk depleting your savings. And you'll probably need that money, because Medicare doesn't cover all health care costs. Fidelity Investments, in fact, estimates that a 65-year-old couple will need more than $200,000 over 20 years for health expenses not covered by Medicare.
For that reason, Wider warns, boomers should review their insurance options before taking early retirement. Don't let your coverage lapse — even if means paying for COBRA — until you've obtained coverage from another insurer.
Going without insurance, he says, "could have enormous financial consequences. More than half of people in bankruptcy in this age group are there because of health problems."
By Sandra Block
As published on USAtoday.com
http://www.usatoday.com/money/perfi/retirement/2008-01-14-boomer-health-coverage_N.htm?loc=interstitialskip&POE=click-refer
CNBC's Bertha Coombs offers tips to help keep those expenses in check.
Many employees are seeing the cost of their company's health insurance coverage increase this year, along with health insurance benefit cutbacks. Sixty percent of Americans (about 180 million people) are insured through employer-sponsored plans. That's down from 65 percent at the start of the decade. So what do you do when your health insurance costs go up or when your company makes you pay a bigger share? CNBC correspondent Bertha Coombs offers some insight.
How much more are we paying this year?
According to a Towers Perrin 2008 Healthcare Cost Survey, in dollar terms, employers are paying an average of $9,144 per employee for health insurance this year. That's up 6 percent from last year. On average, employees are being asked to cover about $2,064 of that premium. The way the numbers work out, we are paying 8 percent more than last year.
Why are we paying more?
We're being asked to pay a bigger share of the cost increases. Over the last five years, while employer costs have risen 40 percent, employee costs are up a whopping 60 percent, according to that same survey. And it's an even bigger bite for family coverage. While we pay about 20 percent of the cost for our own coverage, we're being asked to pay nearly a quarter of the premium to cover families.
While we're paying more, it seems like employers also cutting back on coverage?
In some cases, yes. We're seeing a trend in companies moving from a co-pay system to co-insurance. Many of us are charged a $25 co-pay for a doctor visit. If you've got co-insurance, instead you'd pay 20 percent of the doctor's bill for that visit. Co-insurance can make a big difference when it comes to drug coverage. Towers Perrin reports it's generally 20 percent of the cost of generics and an even bigger percentage for brand-name drugs.
So what can we do to save money this year?
How to save on medical costs
