Thursday, April 5, 2012

Will Baby Boomer Icons Leave Retirees Reeling?

By Laura Rossman

What do Kodak, Twinkies, and American Airlines have in common? Worried retirees.

Baby boomer icons Kodak — the maker of the brownie camera, the first camera for many baby boomers; Hostess — the maker of Twinkies, Ding Dongs, and Wonder Bread; and American Airlines have all announced they are filing for reorganization under the bankruptcy laws. And their retired employees hope that turnaround won’t lead to dramatic changes in their retiree health care benefits.

Unfortunately, these three companies find themselves part of a growing trend as employers looking to cut costs reduce or eliminate retiree health care benefits. Among employers with 500 or more employees, just 21 percent offer retiree health benefits, down from 40 percent in 1993, according to the Employee Benefit Research Institute (EBRI). Some companies that drop their group retiree health plan ask their retirees to purchase their own Medicare health plans. The companies offer the retirees a subsidy to help the retiree pay the cost of their own insurance.

Others increase the costs dramatically, effectively pushing retirees to purchase Medicare insurance plans on their own at a lower cost than the group plan.

Retirees who end up shouldering the entire cost find themselves with a new financial burden and in a maze of Medicare plan choices. And the cost can be significant. EBRI estimates that a 65-year-old couple with original Medicare, a Medigap plan, and a Part D plan will spend between $158,000 and $271,000 in health care costs during their lifetime.

So if you are planning for retirement now, make sure you calculate in the cost of health care in retirement. And even if you have retiree health insurance, make sure you have some money in your nest egg earmarked for increases in health care costs in retirement.

If you find yourself in the position of purchasing your own Medicare health insurance, make sure that you shop and compare plans. Look beyond the company that your employer used. It might be the right coverage, but as an individual Medicare insurance buyer you will find a much wider choice of plans. So determine whether you want a Medicare Advantage, Medicare supplement, and Medicare Part D plan. Then compare plans from several companies to make sure you find the right plan for this stage of your life. And ask about history of price increases with the plan you are considering so there might be fewer health care surprises ahead.

Laura Rossman heads up marketing and communications for Longevity Alliance, an independent national insurance broker working with more than 24 insurance companies to help compare Medicare supplement and Medicare Advantage plans. She has been in the health and senior care services industries for more than 20 years.

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