Feds offer $5b to shore up early retiree coverage

Feds offer $5b to shore up early retiree coverage Trying to entice cost-weary employers to keep providing medical coverage to early retirees, the Obama administration is making $5 billion available until the safety net of the new health care law is in place.

Older baby boomers working for large companies — and looking to downshift to less-demanding employment_ could be the immediate beneficiaries.

Effective next month, federal subsidies will allow employers to recoup a big chunk of the cost of medical claims for retirees ages 55 to 64 not yet eligible for Medicare, according to a White House official who spoke on condition of anonymity ahead of the official announcement expected Tuesday.

However, in the long run, experts predict that President Barack Obama's health overhaul will accelerate the decline of employer-sponsored retiree coverage, by making it easier for people to find and keep affordable coverage on their own.

Starting in 2014, the health care law forbids insurers from denying coverage to people with medical problems, limits what the companies can charge older individuals, and sets up competitive health insurance markets called exchanges — where consumers can buy a policy, in many cases with direct government assistance. Early retirees will have options they don't currently enjoy.

"Employers have been offering these benefits because there is no alternative source of coverage," said economist Paul Fronstin of the Employee Benefit Research Institute. "I think they're going to be asking themselves why they should continue offering retiree coverage. There is no question this is something that is on employers' minds."

Preventing an immediate rush to the exits by employers is one of the main goals of the new subsidy program, authorized under the health care overhaul law. Among employers with 500 or more workers, only 28 percent offer health benefits to early retirees, down from 46 percent in 1993, according to Mercer, a benefits consulting firm.