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GETTING PERSONAL: Health-Care Overhaul Could Aid Early Retirees

By Victoria E Knight
A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones) — Health-care legislation under consideration in Congress would make it easier for early retirees to buy medical coverage on their own, removing a hurdle that keeps even people with substantial nest eggs at their jobs until they reach 65.

Paying for, and sometimes even just getting, health insurance is a struggle for early retirees looking to stay covered until they qualify for Medicare. If they have any health problems, they pay very high premiums, face exclusions or can be denied coverage in the state-regulated markets for individual policies. Group plans offered by employers are generally more comprehensive and often cost less.

Those fortunate enough to have early-retiree health benefits from an employer are being hit by corporate cost-cutting: The portion of premiums that they pay is rising, and some companies are dropping coverage altogether, according to a survey released Wednesday.

"Even for clients who are very comfortable financially, health coverage is something that weighs on their minds quite heavily," says Cheryl R. Holland, president of Abacus Planning Group, Inc., a fee-only financial planning and investment advisory firm in Columbia, S.C. Holland's clients are typically in their 50s with $3 million to $5 million in investable assets.

The health-care bills now in Congress would prevent insurers from denying medical coverage to individuals with pre-existing conditions. At present, three in 10 applicants aged 60 to 64 are turned down by insurers. Of those applicants who underwent medical underwriting and were offered policies in 2008, one-quarter were offered coverage at higher-than-standard premiums, according to the latest data from America's Health Insurance Plans.

The bills would also limit how much insurers can vary premiums based on an individual's age. In the House bill, older people would pay no more than twice what the youngest are charged. The Senate is in the process of assembling a bill that will likely allow insurers to charge older people up to three times as much. Currently, around two-thirds of states set no limits on what insurers can charge.

Only one in three large employers now offers health coverage to early retirees. And, on average, they pay three to four times as much as active workers, says Ron J. Fontanetta, a principal with Towers Perrin, a human resources consulting firm, who is an expert on health benefits.

Early retirees can expect to pay about $330 a month for single coverage and $880 a month for family coverage from their company in 2010. Active workers will pay about $90 a month for single coverage and $290 a month for a family, according to a new study by Towers Perrin , which analyzed the health plans of 550 of the nation's largest employers.

The cost of providing health-care benefits to early retirees is much higher than for active employees, and employers are passing on more of it. While employers on average will contribute 77% to 80% towards active workers' premiums in 2010, they will pick up less than half of the premiums for retirees under age 65, according to the survey.

If the health-care overhaul passes and early retirees can more easily buy coverage on their own, some employers may decide to pull their programs or offer a fixed stipend instead, according to Fontanetta. However, employers are unlikely to drop the benefit straight away, he says. Both the House and Senate Finance committees' bills provide for temporary reinsurance programs under which the federal government would pick up a large share of the cost generally until 2013 for employers which continue to offer the benefit.