Monday, August 21, 2006
Time For A 401(Rx)
Only 21 percent of big U.S. firms offered retiree healthcare insurance in 2005, down from 40 percent in 1993. These numbers are unlikely to improve. According to a recent survey of 163 firms, only 5 percent said they would not consider curbing medical benefits for retired employees in the future. Corporations are cutting benefits of all sorts, from pensions on down. The only available alternative to pensions, however imperfect they may be, are 401(k) plans to which employees may contribute part of their income, a portion of which their employers will presumably match. The future for retiree healthcare insurance may lie with a similar approach, which the article at the link below calls 401(Rx) plans. These would enable employees to make contributions to a fund set aside exclusively for their future medical care, from which they may be able to withdraw funds, although not tax-free, after the age of 59. Just as in the case of 401(k) plans, employers would match a pre-defined portion of the employee's contributions. The rule to allow access after 59, but before retirement age, would enable employees to break away to start their own businesses - or, clearly, to retire early without incurring the cost of getting private health insurance. The article stresses that retiree healthcare funds of some kind will be necessary to offset the costs of senior healthcare which, for a 65 year old couple with an average life expectancy, would reach $200,000 in Medicare premiums, drug costs, co-payments and other out-of-pocket expenses.
"Actually, what we need is a 401(Rx)" from the Star-Telegram