Employers let off one health-care hook

Nancy Marshall-Genzer Dec 27, 2007
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Employers let off one health-care hook

Nancy Marshall-Genzer Dec 27, 2007
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AMY SCOTT: Turning now to the U.S. economy . . . The Equal Employment Opportunity Commission has handed businesses a major victory. The commission ruled yesterday that companies can cut their retirees’ health-care benefits once they turn 65. That’s, of course, when Medicare kicks in. The ruling means employers can shift the burden of insuring retirees to the federal government.

So, with all that extra savings, employers will probably start spending more money on younger workers, right? Don’t count on it. Marketplace’s Nancy Marshall Genzer reports.


NANCY MARSHALL GENZER: Many employees dream of retiring with a Cadillac health care plan. So much for sweet dreams. Under the EEOC’s new rule, your employer can drop you when you turn 65. That Cadillac plan morphs into the standard Chevy — Medicare.

But your sacrifice could help keep younger workers on the retirement road. James Klein is president of the American Benefits Council, which lobbies for large employers. He says any money saved by cutting coverage will be used to pay benefits for early retirees — teachers, for example.

JAMES KLEIN: For many teachers, the ability for them to retire before age 65 was dependent upon their ability to continue getting health-care coverage from their former employers — school districts.

In fact, two teachers unions support the new rule. But Anna Burger of the Service Employees International Union says employers could keep any savings from Medicare for themselves.

ANNA BERGER: It’s hard to imagine how you can expect them voluntarily to take those savings and share them with younger workers unless there’s some mechanism to require it.

Analyst Henry Aaron of the Brookings Institution says this ruling follows a trend of more government-funded health care. That’s something employers want, because it allows them to focus on business, not health insurance.

HENRY AARON: Most employers, I think, are primarily interested in matters other than administering health-care benefits. They want to do other things — make those commodities, sell those goods.

Already, some business groups are saying without Medicare they couldn’t afford to insure any of their retired workers.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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