Don't bet on your retiree health care

By Bankrate.com

As the first wave of baby boomers makes the transition from career track to riding the retirement rails, here's a warning from those getting ready to push off from corporate life: Don't believe everything you're told, even if you have it in writing, especially where post-retirement health insurance is concerned.

From corporate penthouses to state legislatures, a move to cut and, in some cases, eliminate retiree medical benefits altogether has caught hold. It's leaving upcoming retirees with a dilemma many don't even realize they're facing: How are they going to pay for future medical needs not covered by health insurance or Medicare? For many, the answer will redefine their retirement.

Benefits disappear

Ron Harper started working for Allstate Insurance in 1989 after 22 years in the grocery business. As a representative of the insurance giant, Harper had an enviable future retirement, with a 401(k), generous pension program and health insurance for himself and his wife. But when the company restructured its employment policies, Harper and more than 6,000 fellow agents found most of their benefits had been stripped away.

Although he still sold Allstate Insurance, he was no longer considered a company employee. Instead, he and the others were reclassified as "independent agents," and they lost their company pension plan and post-retirement medical-insurance benefits. Harper, who once paid $130 a month for family medical-insurance coverage, was forced to move to a self-paid policy with a whopping $5,450 deductible, supplemented by a health-savings account he established.

When, for example, Harper's wife underwent a colonoscopy, it cost the couple about $3,000 out of pocket. Harper observes that one downside to losing medical coverage is that many don't have the money to pay for preventive health care, so it falls by the wayside.

Now in his late 50s, the Thomson, Ga., resident publishes a newsletter for Allstate agents and is one of more than 6,000 plaintiffs in an unresolved lawsuit against the company that continues to wind through the courts.

The decline of retiree health benefits

Courtney Coile, an assistant professor of economics at Wellesley College and a research associate of the Center for Retirement Research at Boston College, says the number of companies with 200 or more workers that offer retiree health insurance fell from 66% in 1988 to 33% in 2005.

The trend continues in both private industry and government. "Future retirees are less likely to have retiree health insurance and those who (do) are likely ... to pay more for it," Coile says.

Health insurance doesn't come cheap, even when you're young and healthy. But as you age, becoming more prone to disease and illness, it skyrockets. Until Medicare eligibility kicks in at 65, many Americans who retire before then are left with few health-care options.

Continued: Don't neglect preventive medicine

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