Most US Firms to Keep Retiree Drug Benefits-survey

WASHINGTON (Reuters) - Nearly 80 percent of large employers providing retiree drug coverage will maintain it and accept government subsidies as Medicare begins prescription drug benefits next year, a survey released on Wednesday said.

The outlook for future years is uncertain as companies adjust to the new program. Just half of the 300 private-sector firms surveyed said they were likely to keep the benefits in 2010.

Companies receive government subsidies if they provide drug coverage that is at least as good as what Medicare will offer beginning in January. Average savings for the companies will be $626 per retiree, according to the survey

"The widespread dropping of drug benefits that some had feared has been averted so far as businesses figure out what their longer-term response will be," Kaiser Family Foundation President and Chief Executive Drew Altman said.

The nonprofit Kaiser foundation conducted the survey with consulting firm Hewitt Associates. The companies polled, all with at least 1,000 employees each, provide health benefits for 5.7 million retirees and dependents.

Among the companies that will not maintain Medicare-level drug coverage, 10 percent said they would provide some drug benefits to supplement Medicare's offerings. Nine percent said they would stop providing drug coverage to Medicare-eligible retirees.

Medicare is the federal health insurance plan that covers 42 million elderly and disabled Americans.

Retirees should chose carefully before deciding to give up employer coverage, the study authors said. Forty-four percent of the companies that will keep drug benefits in 2006 said retirees will not be able to re-enroll in the employer plan if they are unhappy with Medicare.

Health-care costs for retirees rose an average of 10 percent between 2004 and 2005, the companies reported. That includes costs for people over 65 who were eligible for Medicare and retirees younger than 65.

Seventy-one percent of companies raised the amount retirees pay toward premiums between 2004 and 2005.