CHAMPAIGN, Ill. A nearly two-decade trend that is stripping away employer-provided health-care benefits for retirees in private business will likely continue and could soon hit an even deeper pool of government retirees, new research by a University of Illinois elder law expert warns.
Richard L. Kaplan says the steady erosion of private sector benefits stems largely from a 1992 change in accounting standards that requires employers to project future coverage costs, rather than just booking expenses when payouts are made years down the road.
This year, the same accounting requirements take effect for state and local governments, he said, adding hefty new financial obligations to balance sheets already out of whack amid the nation's worst economic downturn since the Great Depression.
"When those future costs are disclosed, the pattern has been that stakeholders in this case taxpayers say, 'This is too much,' " Kaplan said. "There could be a big pushback from ordinary taxpayers who used to get these benefits and had them taken away or who never got them at all."
Private companies have increasingly scaled back retiree health-care benefits or eliminated coverage entirely to shore up bruised bottom lines and investor confidence, said Kaplan, whose research appears in the current issue of the Yale Journal of Health Policy, Law and Ethics.
Among U.S. companies with at least 200 employees, only 35 percent provided any retiree health-care benefits in 2006, compared with 66 percent in 1988. Kaplan says similar tough choices lie ahead for government, where retiree health-care benefits are more common, offered by 48 of 50 states and most local governments.
"Health-care benefits for government retirees are going to face considerable scrutiny, probably for the first time, because the accounting standards will make balance sheets look terrible," he said. "And unlike with pensions, which are at least partially fund
|Contact: Jan Dennis|
University of Illinois at Urbana-Champaign