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The Uncertain Promise of Retiree Health Benefits.

Among the financial concerns that retired Americans face are the cost of health care, and the availability of health care benefits to cover these costs. For retirees, the source of health care benefits may be medicare, individual insurance plans, former employer policies, or a combination of these. Of particular attention recently are employer-provided health care benefits for retired employees. In The Uncertain Promise of Retiree Health Benefits, Mark Warshawsky provides a detailed account of the many issues involved in' employer-provided retiree health care and some options for reforming the current system.

Several factors have brought added attention to employer-provided retiree health care benefits in recent years. Perhaps most critical is the establishment of Financial Accounting Standard 106. This standard, which will be gradually phased in for private-sector employers during the next several years, requires that financial statements include information about liabilities associated with providing health care benefits to future retirees. Only actual expenditures for retiree health benefits are now recognized; the new standard could increase reported corporate liabilities by an estimated $400 billion.

The requirement to recognize retiree health care liabilities on financial statements has heightened awareness of the potential cost of providing these benefits. The requirement also has served to increase interest in finding alternative methods of funding retiree health benefits, emphasizing gradual funding during an employee's worklife rather than lump-sum funding as retirees receive health care. (Such "prefunding" of retiree health care benefits might be similar to funding requirements for pension plans, which by law must maintain sufficient funds to pay future benefits.)

The Uncertain Promise of Retiree Health Benefits is organized into 10 chapters that explore a variety of issues that are part of the retiree health benefits debate. It includes topics such as plan descriptions; legal and tax considerations; court cases; accounting requirements; funding options; and the extent of coverage. In addition, the book explores some recent political actions that could affect retiree health benefits. Warshawsky concludes with suggestions for future research and a series of commentaries by noted experts on labor and health care issues. The commentaries provide a balance of views, offering concurring and dissenting opinions on some of Warshawsky's assumptions and conclusions.

To frame the retiree health care debate, The Uncertain Promise uses data from the Bureau of Labor Statistics Employee Benefits Survey and Current Population Survey on the extent of retiree health care benefits and details of these benefits. Other data sources also are explored, including estimates of current retirees with employer-provided health care benefits and estimates of active employees eligible for retiree health care benefits in the future. Warshawsky cites difficulties estimating employer-provided health care coverage, including problems associated with double-counting workers who also are dependents covered under another health care plan.

Warshawsky discusses several current court cases involving attempts by employers to change or terminate health care benefits provided to current retirees. The courts have offered different views on these matters, ranging from retiree health benefits, once granted, as the absolute right of the retiree, to employer rights to amend a plan based on the language in the plan document. Some courts also have staked out a middle ground, with retiree rights determined by the plan document and external evidence, such as a promise made during an exit interview.

"Policies and Politics," the final chapter of The Uncertain Promise, explores recent events that brought issues of retiree health care benefits into the national political debate. In 1988, for example, Congress approved the Medicare Catastrophic Coverage Act, expanding medicare coverage to include more extensive hospitalization benefits and prescription drug coverage. Funding for these expanded benefits was to come from additional premiums paid by medicare beneficiaries, with wealthier recipients responsible for a disproportionately large percentage of the cost. While the benefits from this new law were considerable, many older Americans spoke out loudly against the potential premium increases; such complaints often were based on incorrect predictions of the size of the premiums. Yet public opinion was vocal enough to force repeal of the law in 1989, before the provisions took effect. Warshawsky suggests that because of this episode, policymakers may be cautious in the future about venturing into issues concerning older Americans and health care benefits.

In addition to providing extensive background details to frame the retiree health care debate, The Uncertain Promise offers some alternative solutions and guidelines for policymakers. Warshawsky has provided interested parties--policymakers, employers, and retirees--with a single volume that offers comprehensive data on a subject certain to remain topical for years to come.
COPYRIGHT 1992 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Wiatrowski, William J.
Publication:Monthly Labor Review
Article Type:Book Review
Date:Nov 1, 1992
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