GAO-01-374

Report to the Chairman, Committee on

Health, Education, Labor, and

Pensions, U.S. Senate

United States General Accounting Office

GAO

May 2001 RETIREE HEALTH

BENEFITS

Employer-Sponsored

Benefits May Be

Vulnerable to Further

Erosion
Page i GAO-01-374 Retiree Health Benefits

Letter 1

Appendix I Methodology 26

Appendix II Case Law Review of Changes to Employer-Sponsored

Retiree Health Benefits 30

Appendix III Benefit Summaries for Selected Medigap Policies 36

Appendix IV GAO Contact and Staff Acknowledgments 37

Related GAO Products 38

Tables

Table 1: Percentage of Elderly and Near-Elderly Individuals

Reporting Fair or Poor Health Status by Employment

Status, 1999 20

Table 2: Examples of Differences in Premiums for a 30-Year-Old

and a 60-Year-Old Male 21

Table 3: Examples of Specific Health Conditions for Which Carriers

May Decline Coverage or Exclude From Coverage 22

Table 4: Sample Monthly Premiums for a 65-Year-Old for Three

Medigap Plans in Four Areas 24

Table 5: 2000 Kaiser/HRET Sample by Firm Size 27

Table 6: Additional Medigap Benefits for Plans C, F, and H 36

Figures

Figure 1: Surveys Report That Employer-Sponsored Retiree Health

Benefits Have Remained the Same or Declined Slightly

Since 1997 for Large Firms 7

Figure 2: Percentage of Retirees With Employer-Sponsored Health

Benefits Has Remained Relatively Stable 9

Contents
Page ii GAO-01-374 Retiree Health Benefits

Figure 3: Health Insurance Premium Increases Resume After a

Decline in the Mid-1990s 13

Figure 4: Baby Boom Generation Will Greatly Increase the Elderly

and Near-Elderly Population 18

Abbreviations

ADEA Age Discrimination in Employment Act

COBRA Consolidated Omnibus Budget Reconciliation Act

CPS Current Population Survey

ERISA Employee Retirement Income Security Act of 1974

FAS Financial Accounting Standards

HIPAA Health Insurance Portability and Accountability Act of 1996

HMO health maintenance organization

Kaiser/HRET Kaiser Family Foundation and Health Research and

 Educational Trust

PPO preferred provider organization

SPD summary plan description
Page 1 GAO-01-374 Retiree Health Benefits

May 1, 2001

The Honorable James M. Jeffords

Chairman, Committee on Health,

 Education, Labor, and Pensions

United States Senate

Dear Mr. Chairman:

In 1999, about 10 million retired people aged 55 and over relied on

employer-sponsored health insurance as either their primary source of

coverage or a supplement to their Medicare coverage.1

 For some of these

individuals, however, concerns exist that the continued availability of

employer-sponsored coverage may be uncertain. As we reported in 1998,

the percentage of employers offering retiree coverage to early retirees—

those aged 55 to 64—had dropped from about 70 percent in the 1980s to

about 40 percent in 1997.2

Concerned about declining employer-sponsored health coverage for early

retirees and Medicare-eligible (age 65 and over) retirees, you asked us to

examine if this trend is continuing. In particular, you asked that we

examine

• changes employers have made to the availability and terms of their health

insurance plans with respect to retiree coverage;

• how factors such as economic conditions, Medicare changes, and

demographic trends may influence employers’ future provision of retiree

health benefits; and

• the ability of retirees without employer-sponsored coverage to obtain

alternative coverage.

To answer these questions, we reviewed available employer survey data;

analyzed the March supplements of the 1995 to 2000 Current Population

 1

In this report, “employer-sponsored” is used to refer to any employment-based group

health coverage, including health plans offered under collectively bargained agreements

and multiple employer associations.

2

Private Health Insurance: Declining Employer Coverage May Affect Access for 55- to 64-

Year-Olds (GAO/HEHS-98-133, June 1, 1998). A list of related GAO products is included at

the end of this report.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-374 Retiree Health Benefits

Survey; reviewed applicable laws and court decisions pertaining to

changes in employer-sponsored coverage; obtained individual insurance

market premiums from insurers and health plans; and interviewed

employee benefits consulting firms and several large employers. Appendix

I provides additional information on our methodology. We conducted our

work from June 2000 through February 2001 in accordance with generally

accepted government auditing standards.

Despite a sustained strong economy and several years of relatively low

rates of increase in health insurance premiums, the decline in the

availability of employer-sponsored retiree health benefits has not reversed

since 1997—the last year for which we had reported previously—and

several indicators suggest that there may be further erosion in these

benefits. Employer benefit consultants we contacted generally indicated

that retiree health benefits were continuing to decline. Two widely cited

employer benefit surveys, however, provide conflicting data as to whether

the proportion of employers sponsoring retiree health insurance remained

stable or declined slightly from 1997 through 2000. In some cases,

employers provide retiree health benefits to current retirees or long-term

employees, but newly hired employees are not eligible. To date, however,

the percentage of retirees with employer-sponsored coverage has

remained relatively stable over the past several years, with about 37

percent of early retirees and 26 percent of Medicare-eligible retirees

receiving retiree health coverage from a former employer. This stability

may also be linked to employers’ tendency to reduce coverage for future

rather than current retirees. In some cases, employers that continue to

offer retiree health benefits have reduced the terms of these benefits by

increasing the share of premiums that retirees pay for health benefits,

increasing copayments and deductibles, or capping the employers’

expenditures for coverage.

Several current and developing market, legal, and demographic factors

may contribute to a further decline in employer-sponsored retiree health

benefits. These factors include

• a resumption of health insurance premiums rising at a rate faster than

general inflation;

• a slowdown in economic growth and potential softening of the labor

market;

• proposed changes in Medicare coverage, such as adding a new

prescription drug benefit, that could affect the costs and design of

employers’ supplemental health benefits for Medicare-eligible retirees;

Results in Brief
Page 3 GAO-01-374 Retiree Health Benefits

• a recent circuit court ruling allowing claims of violations of federal age

discrimination law when employers make distinctions in health benefits

they offer retirees on the basis of Medicare eligibility; and

• the movement of the baby boom generation into retirement age, leading

some employers to have a growing number of retirees relative to active

workers.

Retirees whose former employers reduce or eliminate health benefits

often face limited or unaffordable alternatives to obtaining coverage.

Retirees may purchase coverage on their own—either individual insurance

policies for those under 65 or Medicare supplemental plans for those 65 or

older. However, despite federal laws that guarantee access to some

individual insurance policies to certain individuals who lose group

coverage, retirees’ ages and often poorer health status combine to make

individually purchased health insurance expensive. For example, the

majority of states do not restrict the price of premiums carriers may

charge individuals who purchase individual insurance policies. Thus,

carriers in these states may charge 60-year-old males a monthly premium

close to 4 times higher than what they charge 30-year-old males, and there

may be an even bigger difference if the older individual is not healthy.

Similarly, the number of Medicare supplemental plans that federal law

guarantees to retirees over 65 whose employers eliminate coverage is

limited, and they do not include coverage for benefits such as prescription

drugs. Thus, retirees seeking alternative coverage could receive less

comprehensive coverage and pay more for it than they had previously.

Since World War II, many employers have voluntarily sponsored health

insurance as a benefit to employees for purposes of recruitment and

retention, and some have also offered these benefits to their retirees. The

federal tax code provides incentives for employers to subsidize health

benefits because their contributions can be deducted as a business

expense from their taxes, and these contributions are also not considered

taxable income for employees. Employer-sponsored health benefits are

regulated under the Employee Retirement Income Security Act of 1974

(ERISA),3

 which gives employers considerable flexibility to manage the

cost, design, and extent of health care benefits they provide. However,

ERISA established certain requirements for employers, including that they

provide health plan participants and beneficiaries with a summary plan

 3

29 U.S.C. 1001.

Background
Page 4 GAO-01-374 Retiree Health Benefits

description (SPD) specifying the retirees’ rights and circumstances under

which the health plan can be modified or terminated.4

Concern over the costs associated with retiree health benefits was

compounded in 1993 when the Financial Accounting Standards (FAS)

Board adopted FAS 106, requiring employers to report annually on the

liability represented by the promise to provide retiree health benefits to

current and future retirees. While FAS 106 did not affect an employer’s

cash flow, there has been concern that listing this future liability could

affect companies’ stock prices because the reporting of projected retiree

health care costs affects the overall statement of financial profitability.

Some companies have said that FAS 106 requirements lead to reductions

in reported income and shareholder equity and are a reason for reducing

retiree health benefits. As a means of reducing their reported liability as

well as controlling rising costs associated with retiree health benefits,

some employers have passed a share of cost increases to their retirees in

the form of higher premiums, deductibles, or copayments. Some other

employers have reduced benefits or simply ceased to sponsor coverage.

In the absence of employer-sponsored retiree health benefits, retirees have

certain coverage alternatives, but may find them to be expensive or even

unaffordable. Individuals under 65 may rely on the individual insurance

market or may, in limited instances, be eligible for continuation coverage

from a former employer. For example, individuals whose jobs provided

health benefits that ended at retirement may continue temporary coverage

for up to 18 months under provisions of the Consolidated Omnibus Budget

Reconciliation Act of 1985 (COBRA).5

 For eligible individuals who exhaust

available COBRA coverage, the Health Insurance Portability and

Accountability Act of 1996 (HIPAA) guarantees access to the individual

market, regardless of health status and without coverage exclusions, but

 4

Other requirements on employers include having a process for appealing claim denials,

making available temporary continuation coverage for former employees and dependents,

and meeting specific fiduciary obligations. For more information on ERISA’s applicability

to employer-sponsored health benefits see Employer-Based Health Plans: Issues, Trends,

and Challenges Posed by ERISA (GAO/HEHS-95-167, July 25, 1995).

5

29 U.S.C. 1161-1169 and 26 U.S.C. 4980B. COBRA coverage may entail substantial out-ofpocket costs because the employer is not required to pay any of the premium and may

charge the enrollee up to 102 percent of the group rate. COBRA coverage can be extended

an additional 11 months for most individuals who qualify for disability under the Social

Security Act; however, they may be charged up to 150 percent of the group rate. COBRA

coverage is not required for employers with fewer than 20 employees.
Page 5 GAO-01-374 Retiree Health Benefits

does not restrict the premiums that may be charged to older or less

healthy individuals.6

For retirees 65 years or older, Medicare is typically the primary source of

health insurance coverage. Under traditional Medicare, eligible individuals

may apply for Part A, which helps pay for care in hospitals and some

limited skilled nursing facility, hospice, and home health care, and may

purchase Part B, which helps pay for doctors, outpatient hospital care, and

other similar services. Medicare beneficiaries may rely on private retiree

health coverage from a former employer or union or individually

purchased Medicare supplemental insurance (known as Medigap) to cover

some or all of the costs not covered by Medicare, such as copayments,

coinsurance, deductibles, and most outpatient prescription drug costs.7

Depending on where they live, individuals may have the option of

obtaining Medicare coverage on a fee-for-service basis or from a managed

care or other private plan offered through the Medicare+Choice program

since 1998.8

 Many beneficiaries have been attracted to these plans because

they typically have lower out-of-pocket costs than fee-for-service plans

and offer services not covered by traditional Medicare, such as routine

 6

29 U.S.C. 1181-1191, 26 U.S.C. 9801-9803. HIPAA provides eligible individuals with groupto-individual portability; that is, eligible individuals losing group coverage have access to at

least two individual insurance products. An eligible individual is one who has had at least

18 months of creditable coverage with no break of more than 63 consecutive days; has

exhausted any COBRA or other continuation coverage available under a similar state

program; is not eligible for any other group coverage, Medicare, or Medicaid; and did not

lose group coverage because of nonpayment of premiums by the individual or fraud.

7

The Medicare Current Beneficiary Survey found that in 1996 approximately 32 percent of

traditional Medicare beneficiaries obtain their supplemental coverage as a retirement

benefit from a former employer or union, 30 percent individually purchase Medigap

coverage, and 4 percent have both an employer-sponsored and an individually purchased

supplemental plan. Another 20 percent of traditional Medicare beneficiaries also qualify for

Medicaid or other health coverage to supplement Medicare, and 13 percent have Medicare

only.

8

In the Balanced Budget Act of 1997 (P.L. 105-33, Aug. 5, 1997), Congress established the

Medicare+Choice program to expand Medicare beneficiaries’ health plan options and

encourage wider availability of health maintenance organizations and other types of health

plans, such as preferred provider organizations, as an alternative to traditional fee-forservice Medicare. Prior to 1998, Medicare managed care plans that were paid a fixed

amount per enrollee were known as risk plans. Risk plans, along with new types of plans

authorized by the Balanced Budget Act of 1997, are now known as Medicare+Choice plans.

We previously reported that about 30 percent of Medicare beneficiaries—particularly those

in rural areas—did not have a Medicare+Choice plan available in their location. See

Medicare+Choice: Plan Withdrawals Indicate Difficulty of Providing Choice While

Achieving Savings (GAO/HEHS-00-183, Sept. 7, 2000).
Page 6 GAO-01-374 Retiree Health Benefits

physical exams and prescription drugs. Nearly 6 million people, or

approximately 15 percent of Medicare’s 39 million beneficiaries, were

enrolled in a Medicare+Choice plan as of January 1, 2001, with recent plan

withdrawals causing some beneficiaries to return to the traditional

Medicare program.

Despite a strong economy and relatively small premium increases during

the latter part of the 1990s, available evidence from employer benefit

surveys and employer benefit consultants we interviewed suggests the

decline in employer-sponsored retiree health insurance has not reversed

since 1997—the last year for which we had reported previously. Two

widely cited employer benefit surveys estimate that just over one-third of

large employers, and a smaller portion of small employers, offered health

coverage to some of their retirees in 2000; however, one of these surveys

shows the proportion of large employers offering coverage is the same as

in 1997, whereas the other indicates a further small decline in coverage

since 1997. Other data indicate that the percentage of retirees with

employer-sponsored health insurance remained relatively stable during

this time period. Still, many employers continuing to offer coverage have

reduced the terms of coverage by tightening eligibility requirements,

increasing the share of premiums retirees pay for health benefits, or

increasing copayments and deductibles—thus, contributing to a gradual

erosion of benefits.

Employer sponsorship of retiree health benefits in 2000 was, at best, the

same as in 1997 or, worse, continued to gradually erode according to two

surveys. Surveys conducted by William M. Mercer, Incorporated, indicate

that the portion of firms sponsoring health insurance for early retirees fell

slightly from 41 percent in 1997 to 36 percent in 2000. Similarly, employer

sponsorship of health benefits for Medicare-eligible retirees fell from 35 to

29 percent during this period. As shown in figure 1, this continues a

gradual decline that began in the early 1990s. A second survey—conducted

by the Kaiser Family Foundation and Health Research and Educational

Trust (Kaiser/HRET)—estimates that about 37 percent of large employers

sponsored retiree health benefits in 20009

—the same percentage as in

1997, although with some year-to-year fluctuation. Like the Mercer survey,

 9

For those firms sponsoring retiree health benefits, 92 percent did so for early retirees, and

67 percent for Medicare-eligible retirees.

The Decline in

Employer

Sponsorship of

Retiree Health

Benefits Has Not

Reversed Since 1997

Surveys Conflict as to

Whether Employers’

Offerings of Retiree Health

Benefits Were the Same or

Declined Slightly Since

1997
Page 7 GAO-01-374 Retiree Health Benefits

the Kaiser/HRET survey reflects a significant decline in coverage since

1991.

Year-to-year fluctuations or gradual changes in these surveys’ results need

to be interpreted with caution. These surveys are widely used and based

on random samples designed to be representative of a broader employer

population, but neither may have the precision needed to distinguish small

changes in coverage from year to year because of the response rates and

the number of firms surveyed. For example, only about 45 percent of the

1,887 firms in the Kaiser/HRET sample responded to the survey in 2000.

Similarly, about 50 percent of the sampled firms responded to the Mercer

Figure 1: Surveys Report That Employer-Sponsored Retiree Health Benefits Have

Remained the Same or Declined Slightly Since 1997 for Large Firms

a

The narrow dashed lines between 1993 and 1997 for the Kaiser/HRET survey (at that time

conducted by KPMG Peat Marwick) indicate that the survey did not report on employer sponsorship

of retiree health benefits in 1994 and 1996.

Note: The Mercer data represent retiree health benefits offered by employers with at least 500

employees, whereas the Kaiser/HRET data represent employers with at least 200 employees. Until

1997, Foster Higgins, which merged at that time with William M. Mercer, Incorporated, conducted the

Mercer survey.

The vertical line at 1997 indicates the year for which we had last reported.

Sources: William M. Mercer, Incorporated, and Foster Higgins employer benefit surveys from 1994

through 2000, and KPMG Peat Marwick and Kaiser/HRET employer benefit surveys from 1991

through 2000.

0

10

20

30

40

50

60

1991 1993 1995 1997 1999 1992 1994 1996 1998 2000

Percentage of Large Employers Sponsoring Retiree Health Benefits

Kaiser/HRET Surveya

Mercer Survey (Early Retirees)

Mercer Survey 

(Medicare-Eligible Retirees)
Page 8 GAO-01-374 Retiree Health Benefits

survey, which included 2,797 respondents. Thus, year-to-year differences

may have resulted from differences in those employers that chose to

respond to the surveys. Also, while neither Mercer nor Kaiser/HRET

reported the size of these sampling errors, Kaiser/HRET’s 1999 and 2000

reports indicated that 1-year differences in the percentage of large

employers offering retiree health coverage since 1998 were not statistically

significant.

Large firms are more likely to sponsor health insurance for retirees than

are smaller firms. For example, Kaiser/HRET reported that just over onehalf of firms with 5,000 or more employees sponsored retiree health

insurance in 2000, compared to only about 9 percent of firms with fewer

than 200 employees. According to the Mercer data, the percentage of firms

with 500 to 999 employees that sponsored retiree health insurance in 2000

was about 40 points lower than for those with 20,000 or more employees—

about 30 percent or less compared to about 70 percent.

The percentage of retirees obtaining health benefits through a former

employer has remained relatively stable since 1997. According to our

analysis of the Census Bureau’s Current Population Survey (CPS), in 1999,

about 37 percent of retirees aged 55 to 64 had employer-sponsored

coverage in their own names from former employers, as did about 26

percent of elderly retirees in 1999 (see figure 2).10 Since 1994, these figures

varied by only 1 or 2 percentage points for early retirees and even less for

elderly retirees. Year-to-year differences are too small to be statistically

significant. This stability in coverage may exist in part because employers

tend to reduce coverage for future rather than current retirees.

 10These percentages include only those retirees that had employer-sponsored health

coverage “in their own names.” Nearly 20 percent of early retirees and about 7 percent of

Medicare-eligible retirees also had employer-sponsored coverage through spouses or other

related individuals who may be either active workers or retired.

Percentage of Retirees

With Employer-Sponsored

Coverage Has Remained

Relatively Steady
Page 9 GAO-01-374 Retiree Health Benefits

Figure 2: Percentage of Retirees With Employer-Sponsored Health Benefits Has

Remained Relatively Stable

Source: GAO analysis of Current Population Survey, March Supplements 1995 through 2000.

Employers have adopted several strategies to limit their liability for retiree

health costs other than terminating benefits, and these mechanisms

contribute to an erosion in health benefits available to retirees. Some

employers have restricted eligibility for retiree health insurance to certain

employees, such as those hired before a certain date, thus reducing their

future liability for these benefits without causing a large disruption in

health coverage for those who are currently or soon-to-be retiring.

According to Mercer’s data, about 5 percent of large employers sponsored

Employers Are Restricting

Eligibility, Reducing

Benefits, and Increasing

Employee Costs

Percentage of Retirees

Early Retirees 

Medicare-Eligible Retirees

20

0

5

25

30

35

40

45

1994 1995 1996 1997 1998 1999

15

10
Page 10 GAO-01-374 Retiree Health Benefits

retiree health insurance in 2000 for only selected employees, typically

excluding employees hired more recently.11

Employers have also attempted to better manage or control their health

care expenditures by increasing the share of health care costs for which

the retiree is responsible. This approach encompasses a range of activities

and includes employer efforts to increase the retirees’ deductibles,

copayments, and premium share; cap the employer’s overall expenditures;

or pay a fixed amount per retiree for health care.12 For example, more than

10 percent of employers reported having recently increased retirees’

potential out-of-pocket costs for deductibles, coinsurance, and

copayments. Kaiser/HRET and Mercer, respectively, report that 16 to 25

percent of employers increased the retiree’s share of their premium

contribution during the last 2 years. According to Mercer data, about 40

percent of large firms that offer early retiree health benefits now require

these retirees to pay the entire premium—an increase of 8 or more

percentage points since 1997. Likewise, the percentage of firms requiring

Medicare-eligible retirees to pay the entire premium has increased 7 or

more points during this time period.

In other cases, employers have established caps on their overall

expenditures for future retiree health benefits. The 1999 Kaiser/HRET

survey estimated that about 35 percent of all large firms had recently

capped their total projected contribution for retiree health benefits. How

employers will ensure spending does not exceed the caps and how

coverage will be affected are not clear. Benefit consultants we interviewed

stated that employers typically set caps prospectively at a level higher than

current spending. In some cases, employers that find they are approaching

the cap for retiree health spending will raise it.

Some employers are considering—but not yet widely implementing—a

more fundamental change by shifting to a defined contribution plan, under

 11Less than one-third of large employers offered retiree health benefits to most retirees in

2000—an 8 percentage point drop since 1997. According to Mercer officials, the percentage

of firms offering benefits to most retirees represents firms making these benefits available

to employees who were retiring at the time of the survey.

12Although these strategies are consistent with those used to control costs for active

employees, employers typically pay a much higher portion of premiums for their active

workers than for their retirees. According to Mercer’s 2000 annual survey, on average,

employers paid about two-thirds or more of the premium for active workers compared to

about one-third of the premium for retirees.
Page 11 GAO-01-374 Retiree Health Benefits

which an employer directly provides each retiree with a fixed amount of

money to purchase coverage, either in the individual market or through a

choice of plans offered by the employer. The individual is then responsible

for the difference between the employer’s contribution and the selected

plan’s total premium. In addition to the potential cost savings, employers

report that a defined contribution plan (1) could be administratively

simpler (if the employer simply provided a payment retirees could use to

purchase individual coverage) or (2) could allow them to offer retirees a

wider choice (if the employer provided multiple plan offerings and retirees

could purchase individual coverage as well). Thus far, few employers have

adopted a defined contribution approach.13

Benefit consultants we interviewed said that many employers would

prefer to move toward a defined contribution approach, but noted several

issues that would need to be addressed before making such a fundamental

change. For example, a recent study by PricewaterhouseCoopers stated

that employers are uncertain about (1) the availability of insurance

products that would meet their objectives for employee choice with a

defined contribution approach, (2) retirees’ readiness to assume the

responsibility for managing their health benefits, and (3) the potential loss

of the existing tax exclusion for the employee if the employer shifts to a

defined contribution.14 Contractual bargaining agreements with union

plans and concerns among employees and retirees about major changes in

their health benefits have also limited employers’ ability to shift to such an

approach. Employer consultants also indicated that a defined contribution

approach would highlight differences in health benefit costs among

employees. Differences in how much an employer pays for an employee’s

health benefits are not readily apparent with defined benefit plans because

 13Limited data are available regarding the use of defined contributions by employers for

active workers or retirees. A recent Hay Group survey shows that only 8 percent of

employers with at least 100 employees pay a fixed amount per employee for retiree health

benefits, but this may not in all cases reflect a defined contribution plan unless the

employer also allows retirees flexibility in selecting their health plan or allows them to use

the employer contribution to purchase an individual insurance policy. See Hay Group,

Benefits Report, 1999. Another survey, by the Center for Studying Health System Change,

found that only 8 percent of employees are paid a fixed employer contribution amount and

have a choice of health plans.

14Some defined contribution strategies may retain the preferential tax treatment afforded to

employer-sponsored health insurance. For example, employers could maintain these tax

advantages by adopting defined contribution strategies that comply with Section 125 of the

Internal Revenue Code, which allows contributions of pretax dollars for health care

spending accounts, or in which the employer sponsors a choice of plans.
Page 12 GAO-01-374 Retiree Health Benefits

each employee is offered the same set of benefits at the same premiums.

Such differences, however, could become apparent and potentially

contentious under a defined contribution approach. For example, if each

employee were given the same fixed amount for health insurance, those

who were older, less healthy, in need of family coverage, or living in a

more expensive area could pay significantly more than other employees to

purchase comparable coverage. Alternatively, if employees were given a

risk-adjusted fixed amount, those who were older or otherwise more

costly would receive a larger payment than would others.

Various factors suggest that an erosion in employer-sponsored retiree

health insurance may continue. Most immediately, employers are

experiencing the resurgence of inflation in their premium costs and thus

could look for ways to further control costs to remain competitive,

especially if the slowing of the economy continues. Moreover, if the

Medicare program establishes an outpatient prescription drug benefit,

some employers may reexamine their need to offer retiree health

coverage. In addition, a recent court case validating a claim of age

discrimination under federal law could have significant implications for

employer-sponsored retiree health coverage. In the longer term, as the

number of retirees relative to active workers increases with the aging of

the baby boom generation, concerns over employers’ retiree health costs

are likely to grow.

The resumption of large health insurance premium increases and a general

economic slowing could exacerbate the decline in employer-sponsored

health insurance for retirees. Survey data suggest that health insurance

premiums for employer-sponsored coverage are beginning to rise at an

increasing rate, and these increases will likely be reflected in larger future

reported liabilities. As shown in figure 3, premium increases were higher

than the general inflation rate from 1990 through 1994, but increased less

than general inflation from 1995 through 1997. Because the actual level of

premium inflation was lower than what had been anticipated for this latter

period, some firms reduced their projected FAS 106 liabilities, with some

even showing increasing profits as a result of their adjusted liabilities for

retiree health benefits. Beginning in 1998, however, premiums began again

to rise faster than general inflation and were about 5 percentage points

above general inflation in 2000. Premium increases have occurred among

all major insurance types, including health maintenance organizations

(HMO), preferred provider organizations (PPO), and traditional indemnity

plans.

Increasing Cost

Pressures and Other

Factors May Further

Erode EmployerSponsored Health

Coverage

Rising Health Insurance

Premiums and General

Economic Factors Could

Influence Employers’

Offering of Retiree Health

Benefits
Page 13 GAO-01-374 Retiree Health Benefits

Figure 3: Health Insurance Premium Increases Resume After a Decline in the Mid1990s

Note: Premium increases were adjusted for general inflation. Trend lines showing the adjusted

premium rates below zero indicate that unadjusted premium increases were lower than the general

inflation rate.

Source: GAO calculations based on data from KPMG Peat Marwick and Kaiser/HRET employer

benefit surveys and the Bureau of Labor Statistics’ Consumer Price Index.

The strength of the overall economy may also affect whether employers

provide retiree health benefits. Employment remains at near-historic high

levels, which could make employers hesitant to reduce employee benefits

that potentially could harm their recruitment and retention in a tight labor

market. However, if economic growth and employment levels decline, as

economic indicators are starting to show, employers may be more willing

to reevaluate salary and benefits to determine the combination that is

most effective in recruiting and retaining employees.

The strong stock market during the 1990s also provided some employers

with high rates of return on pension and other assets that could be used to

cover some retiree health benefit costs. ERISA requires employers to

prefund their future pension benefit liabilities for retirees, but not their

retiree health benefits. Thus, employers are unlikely to have significant

investment income to fund retiree health benefits directly. However, some

employers have transferred some of the excess pension assets generated

by investment earnings to finance their retiree health benefits. This option

-4

-2

0

2

4

6

8

10

12

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Percentage Change in Premiums (adjusted for inflation) from Previous Year

Indemnity

PPO

HMO
Page 14 GAO-01-374 Retiree Health Benefits

to finance retiree health benefits could be curtailed as the rising stock

market seen in the 1990s levels off. Further, recently proposed Internal

Revenue Service regulations that clarify employers’ ability to transfer

surplus assets from a defined benefit pension plan to a retiree health

benefit plan would prevent an employer that does so from subsequently

significantly reducing the number of retirees covered or the cost of such

coverage.15

Recent and proposed changes to Medicare are also leading employers to

reexamine their design of retiree benefits that supplement Medicare.

Notable developments include withdrawals of health plans participating in

the Medicare+Choice program and proposals to add prescription drug

coverage to Medicare. A Medicare prescription drug benefit could

significantly lower the cost of providing retiree health coverage, but may

affect employers’ interest in doing so. Prescription drugs are typically the

largest component of costs for employer-sponsored retiree health benefits

for Medicare-eligible enrollees.

The recent withdrawals of some health plans participating in

Medicare+Choice could affect some employers that had anticipated

savings in their retiree health benefit costs and had encouraged employees

to join these plans. Medicare+Choice plans typically offer health benefits

that are not available through traditional Medicare but are generally

included in employer-sponsored Medicare supplemental coverage, such as

prescription drugs and reduced cost sharing. Furthermore, many

Medicare+Choice plans have historically charged enrollees small or no

premiums. The 2000 Mercer survey indicates that 43 percent of large

employers that provide retiree health coverage offer a Medicare+Choice

HMO, and that 11 percent of Medicare-eligible retirees are enrolled in one

of these plans.16 Some employers encouraged employees to enroll in

Medicare+Choice plans by lowering their premium contributions or

enhancing benefits. However, benefit consultants we interviewed report

that some employers are concerned about recent Medicare+Choice plan

premium increases and withdrawals. Mathematica Policy Research, Inc.,

reports that Medicare+Choice premiums more than doubled from an

 15These proposed regulations were published in the Federal Register on Jan. 5, 2001, 66 FR

1066.

16For comparison, the Mercer survey reports that for large employers, 19 percent of preMedicare-eligible retirees and 34 percent of active workers are enrolled in HMOs.

Medicare Changes Are

Likely to Influence

Employer-Sponsored

Retiree Health Coverage
Page 15 GAO-01-374 Retiree Health Benefits

average of $6 per enrollee per month in 1999 to $14 in 2000 and are

expected to increase further in 2001.17 Since 1999, more than 200 plans

have fully terminated their Medicare+Choice contracts, reduced their

service areas, or announced plans to reduce their participation in 2001.18

As Medicare+Choice plans drop out of the market, some employers are

left to find alternative coverage for retirees for whom they had promised

benefits.19

The effects of a Medicare prescription drug benefit, if enacted, are less

certain but potentially significant. More than 40 percent of Medicare

beneficiaries had prescription drug coverage from a private supplemental

plan in 1996, and three-quarters of them received this prescription drug

coverage from employer-sponsored plans. According to benefit

consultants’ reports and some employers we interviewed, prescription

drugs typically represent 40 to 60 percent of employers’ retiree health

costs for Medicare-eligible enrollees and have been the fastest-growing

element of health costs, increasing by 17 percent or more during the last

year. Thus, adding a prescription drug benefit to Medicare could lower or

make more predictable employers’ costs, encouraging some employers to

retain retiree health benefits. Conversely, the enhanced Medicare benefit

could reduce the value employees place on employer-sponsored retiree

health benefits, making it easier for employers to reduce or eliminate

coverage.

Benefit consultants and recent studies indicate that employers’ responses

to Medicare coverage of prescription drugs could vary depending on the

 17Amanda Cassidy and Marsha Gold, Medicare+Choice in 2000: Will Enrollees Spend More

and Receive Less? (Mathematica Policy Research, Inc., July 2000, p. 9). For 2001, initial

plan submissions to the Health Care Financing Administration (HCFA) indicate a further

increase in Medicare+Choice premiums to an average $25 per enrollee per month.

However, these 2001 initial premiums could be reduced when HCFA releases revised

premiums and benefit designs as resubmitted by plans to reflect changes required by H.R.

5661, the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of

2000.

18Medicare+Choice: Plan Withdrawals Indicate Difficulty of Providing Choice While

Achieving Savings (GAO/HEHS-00-183, Sept. 7, 2000).

19For example, one large employer we interviewed indicated it had encouraged eligible

retirees to enroll in Medicare+Choice plans by providing outreach and educational

information informing them of the potential benefits of these plans. This employer had as

many as 19 percent of its Medicare-eligible retirees enrolled in Medicare+Choice plans, but

recent plan withdrawals have reduced the share of retirees participating in these plans to

less than 10 percent.
Page 16 GAO-01-374 Retiree Health Benefits

prescription drug benefit design implemented, for example, the coverage

limits that are included and beneficiary cost sharing that would be

required. One study evaluating two general proposals estimated that

employers would have significant cost savings and likely would retain

supplemental prescription drug coverage for retirees to complement an

outpatient prescription drug benefit.20 However, any savings that might

actually be realized are dependent on the design features that Congress

ultimately enacts and employers’ and beneficiaries’ responses.

According to employer benefit consultants, an August 2000 court ruling

raises concern among some employers and could potentially accelerate

the decline of retiree health benefits, although its actual effect is uncertain

at present. The Third Circuit Court of Appeals, which has jurisdiction for

Pennsylvania, New Jersey, Delaware, and the Virgin Islands, held that

Medicare-eligible retirees have a valid claim of age discrimination under

the Age Discrimination in Employment Act (ADEA)21 when their

employers provide them with health insurance coverage inferior to that

provided to retirees not yet eligible for Medicare. In this case, Erie County,

Pennsylvania, had offered Medicare-eligible retirees an HMO under

contract with Medicare that had several features that were more

restrictive than the point-of-service plan available to those retirees not yet

Medicare-eligible, including a more limited choice of physicians and

required primary care physician authorization for medical services. The

Third Circuit decided that Medicare-eligible retirees were treated

differently because of age but Erie County might not be in violation of the

ADEA if the health plans provided to Medicare-eligible retirees are equal in

either benefits or costs to the plans offered to retirees under age 65.22 The

Third Circuit has sent the case back to the District Court for it to

determine whether the county’s treatment of pre- and post-age 65 retirees,

under their respective plans, meets either the equal cost or equal benefit

requirement under ADEA.

 20See Hewitt Associates, LLC, The Implications of Medicare Prescription Drug Proposals

for Employers and Retirees, Kaiser Family Foundation, July 2000, pp. 4-8.

2129 USC 621-633a. ADEA prohibits employers from discriminating against individuals age

40 or older with respect to compensation, terms, conditions, or privileges of employment.

22Erie County Retirees Association v. County of Erie, 220 F.3d 193 (3d Cir. 2000) cert.

denied, 69 U.S.L.W. 3409 (U.S. Mar. 5, 2001) (No. 00-906).

Recent Court Decision

May Prompt Employers to

Reevaluate Their Retiree

Health Benefits
Page 17 GAO-01-374 Retiree Health Benefits

The implications of the Erie County decision for other employers remain

uncertain. While only about 12 percent of employers offering retiree health

coverage enroll Medicare-eligible enrollees in an HMO—the issue raised in

the Erie decision—many other employers make further distinctions

between the health benefits provided to their retirees based on their

eligibility for Medicare. Also, some employers provide retiree health

benefits only for early retirees and not for Medicare-eligible retirees. Some

benefit consultants have said that this decision, if adopted by other federal

courts, could lead some employers to make changes to their retiree health

benefits so that benefits for Medicare-eligible retirees are no more

restrictive than those offered other retirees, in some cases further eroding

the level of employer-sponsored retiree health benefits. These changes

could include eliminating retiree health benefits; reducing benefits to the

lowest common level for all retirees; offering a Medicare supplemental

plan that, combined with the traditional Medicare program, is at least as

generous as benefits provided to pre-Medicare-eligible retirees; or paying

retirees the same defined contribution to purchase retiree health coverage

whether or not they are Medicare-eligible.

In the past, retiree benefit litigation has not focused on age discrimination,

but on employers’ ability to modify or terminate retiree health benefits.

Since ERISA provides employers considerable flexibility to manage the

cost, design, and extent of health care benefits they provide, federal courts

have generally ruled in favor of the employer when challenged over

termination of the plan or changes in retiree health benefits if the

employer had included the right to change benefits in plan documents or

collective bargaining agreements. Nearly all companies reserve the right in

plan documents to modify health benefits for current and future retirees.

See appendix II for an overview of the case law history regarding retiree

health benefits.

Over the next 30 years, both the number and proportion of Americans

potentially affected by a decline in employer-sponsored retiree health

insurance will increase, whether or not additional employers drop this

coverage. Elderly and near-elderly individuals together will represent more

than one-fourth of the population of the United States in the year 2011—

the year when the first of the baby boomers will turn 65 years old—

compared to one-fifth of the current population. As shown in figure 4, the

number of near-elderly individuals will increase by 75 percent by 2020, and

the number of elderly will double by 2030. Thus, employers will not only

have a larger number of retirees for which to potentially provide health

coverage, but comparatively fewer active workers to subsidize these

Aging of Baby Boom

Generation Could Further

Pressure Employers to

Reduce Retiree Health

Benefits
Page 18 GAO-01-374 Retiree Health Benefits

benefits. This declining base of productive workers to support more

retirees could make it more difficult for many employers to maintain

retiree health benefits.

Figure 4: Baby Boom Generation Will Greatly Increase the Elderly and Near-Elderly

Population

Source: U.S. Census Bureau, “Projections of the Total Resident Population by 5-Year Age Groups

and Sex With Special Age Categories: Middle Series,” selected years 2000 to 2030, January 2000.

0

10

20

30

40

50

60

70

80

2000 2010 2020 2030

Number of Individuals Ages 55 to 64 and 65 or Older (in Millions)

Ages 55 to 64

Ages 65 or Older

24.0

34.8 35.4

39.7

42.1

37.3

53.7

70.3
Page 19 GAO-01-374 Retiree Health Benefits

Federal laws guarantee access to coverage to certain individuals who lose

group coverage. However, the coverage options available to retirees

whose former employers reduce, eliminate, or did not offer health

coverage may be limited. Affected retirees may seek to purchase coverage

on their own as individuals—either an individual insurance market

product for those under 65 or a Medicare supplemental plan for those 65

or older. However, depending on their demographic characteristics and

health status, retirees may encounter difficulty obtaining or affording

comprehensive plans.

Although federal laws, such as COBRA and HIPAA, guarantee some

individuals leaving employer-sponsored group health plans access to

continued coverage or to a product in the individual market, these laws

may offer only limited protections to many retirees that lack access to

employer-sponsored health benefits. Individuals whose jobs provided

health benefits that ended at retirement may continue temporary coverage

for up to 18 months under COBRA, but COBRA may be an expensive

alternative because the employer is not required to pay any portion of the

premium. Also, COBRA coverage is generally not available to individuals

whose employers terminate health insurance after they retire.

Likewise, HIPAA’s group-to-individual portability provision guarantees

access to at least two individual insurance policies, regardless of health

status and without exclusions, to eligible individuals leaving group

coverage. States comply with this provision by using either the federal

rules—which require carriers to guarantee access to certain insurance

policies to eligible individuals—or an alternative mechanism. Under an

alternative mechanism, states may, within broad federal parameters,

design other approaches, such as a state high-risk pool, to provide eligible

individuals with a choice of coverage.23 Depending on the approach taken

by states to comply with HIPAA and the extent to which a state restricts

premium rate variation in the individual market, the premiums these

individuals face may be substantially higher than prices charged to healthy

or younger individuals, and may be cost prohibitive to many retirees.

 23In Private Health Insurance: Progress and Challenges in Implementing 1996 Federal

Standards (GAO/HEHS-99-100, May 12, 1999), we reported that 12 states were operating

under the federal rules and 38 were using an alternative mechanism. Of the 38 using an

alternative mechanism, 22 were using a high-risk pool to provide coverage to these eligible

individuals. Also see Implementation of HIPAA: State-Designed Mechanisms for Group-toIndividual Portability (GAO/HEHS-98-161R, May 20, 1998).

Loss of Employer

Coverage Can Have

Significant

Implications for

Certain Retirees

Federal Laws Provide

Some Protections to

Retirees But Their Impact

May Be Limited
Page 20 GAO-01-374 Retiree Health Benefits

Although these laws are limited in the protections they afford individuals

without access to employer-sponsored health benefits, they may facilitate

the transition of some retirees from employer-based coverage to coverage

in the individual market.

Although federal law provides some retirees with guaranteed access to

certain coverage, others may encounter difficulty obtaining or affording

coverage, especially since health insurance carriers often consider a

retiree’s health status in making coverage decisions, and many retirees

report poorer health. Near-elderly and elderly individuals are the most

likely to report fair or poor health of any age group. The CPS indicates that

more than one-fifth of near-elderly and one-third of elderly individuals

reported fair or poor health in 1999, compared to about 14 percent of 45-

to 54-year-olds. Moreover, as shown in table 1, the retired among these

populations were more likely to report poorer health status than those

who were employed.

Table 1: Percentage of Elderly and Near-Elderly Individuals Reporting Fair or Poor

Health Status by Employment Status, 1999

Percentage reporting fair or poor health

Age Employed Retired

55-64 11.3 21.7

55-61 10.6 19.7

62-64 14.5 23.7

65+ 17.7 35.3

65-74 17.0 30.0

75+ 20.0 40.2

Source: GAO Analysis of March 2000 Current Population Survey.

For retirees under 65, the individual insurance market, on which about 7

percent of the near-elderly population relied for their primary source of

coverage in 1999, may be an option for some individuals until they reach

Medicare eligibility. However, in most states, access to the individual

market is not guaranteed, and individuals may encounter difficulty

obtaining comprehensive plans at affordable prices, or any plans at all.

The problems in purchasing plans may be exacerbated because retirees

who lose employer-sponsored coverage and individually purchase private

health insurance become responsible for the entire premium rather than

the share they paid for employer-sponsored coverage. Further, except for

some self-employed persons and certain individuals with medical

expenses exceeding 7.5 percent of adjusted gross income, the federal tax

Alternative Coverage May

Be Limited, Unavailable, or

Unaffordable to Retirees

Whose Employers

Eliminated Health Benefits
Page 21 GAO-01-374 Retiree Health Benefits

code offers no subsidies for the individual purchase of private health

insurance.24

Unlike the employer-sponsored market, where the price for coverage is

based on the risk characteristics of the entire group, premium prices in the

individual markets of most states are based on characteristics of each

applicant, such as age, gender, geographic area, tobacco use, and health

status. Even for persons with similar health, premium prices can vary

significantly. For example, carriers anticipate that the likelihood of

requiring medical care increases with age. Consequently, individuals

between 55 and 64 in the individual market of most states pay

considerably more than a 30-year-old for the same coverage. For group

policies, older individuals usually pay the same amount as younger

members of the group. Table 2 demonstrates the difference in premiums

charged by carriers we contacted to applicants based solely on age for the

same comprehensive health plan.

Table 2: Examples of Differences in Premiums for a 30-Year-Old and a 60-Year-Old

Male

Deductible (plan

type)

Monthly premium,

30-year-old

Monthly

premium,

60-year-old

Carrier A (Arizona) $250 (indemnity) $162 $512

Carrier B (Illinois) $500 (PPO) $116 $439

Carrier C (Colorado) $0 (HMO) $132 $324

Note: Although the range in prices listed represents differences attributable to age only, each of

these carriers varies its rates for other characteristics as well. In addition to adjustments for

differences in age, Carrier A also varies rates for gender, geographic area, and family size; Carrier B

for gender, geographic area, tobacco use, and family size; and Carrier C for family size.

Source: GAO review of premiums from selected carriers.

About 20 states have passed legislation that limits the amount individual

market carriers can vary premium rates or the characteristics they may

use to vary these rates, but substantial variation exists among these states.

For example, Minnesota allows individual market carriers to vary

premiums for differences in individual characteristics such as occupation,

age, and geographic area; New Hampshire allows carriers to modify

premium rates only for differences in age; and New Jersey does not allow

 24The federal tax code also does not provide subsidies to individuals who purchase COBRA

continuation coverage.
Page 22 GAO-01-374 Retiree Health Benefits

carriers to vary rates on the basis of any individual characteristics.25 In

states where no restrictions apply, a carrier may also engage in medical

underwriting, whereby it evaluates the health status of applicants to

determine whether it will charge a higher premium rate, exclude an

existing health condition from coverage, or deny coverage altogether. For

example, individuals with serious health conditions such as heart disease

are almost always denied coverage. Other, non-life-threatening conditions,

such as chronic back pain, may also be excluded from coverage. In

contrast, under a group plan, individuals with these conditions could not

be denied coverage nor be required to pay a higher premium than others in

the plan, and specific conditions could only temporarily be excluded from

coverage. Table 3 provides examples of how several large individual

market carriers treat non-HIPAA-eligible individuals with certain health

conditions in states that do not prohibit medical underwriting.

Table 3: Examples of Specific Health Conditions for Which Carriers May Decline

Coverage or Exclude From Coverage

Conditions for which an applicant may

be denied coverage altogether

Conditions that may be explicitly

excluded from an applicant’s coverage

Alzheimer’s disease Asthma

Diabetes Glaucoma

Hypertension Impotence

Migraine headaches Parkinson’s disease

Rheumatoid arthritis Ulcers

Source: GAO review of selected carriers’ medical underwriting practices.

Federal law provides certain guarantees to ensure that retirees over 65

have access to Medicare supplemental policies in the event that an

employer eliminates or reduces coverage; however, the coverage

alternatives available to these individuals may be limited, less

 25See Private Health Insurance: Declining Employer Coverage May Affect Access for 55- to

64-Year-Olds (GAO/HEHS-98-133, June 1, 1998) and Private Health Insurance: Millions

Relying on Individual Market Face Cost and Coverage Trade-Offs (GAO/HEHS-97-8,

Nov. 25, 1996).
Page 23 GAO-01-374 Retiree Health Benefits

comprehensive, or more expensive.26 For example, a retiree over 65

receiving supplemental coverage through a typical private, employersponsored plan may receive coverage for a number of benefits, including

prescription drugs. If the employer eliminated this coverage, the affected

retiree could seek to purchase alternative coverage on his or her own

through the Medigap market. However, under federal law, these

individuals would be guaranteed access without medical underwriting to

only 4 of the 10 standardized Medigap policies available in most states.27

None of these four plans includes prescription drug coverage. Access to

other Medigap plans, including those with limited prescription drug

coverage, could depend on the retiree’s health and the carrier’s willingness

to offer coverage.28 Thus, retirees could end up with less comprehensive

coverage than they received from their former employers.

Further, in cases where the employer had contributed to the majority or all

of the cost of the Medicare-eligible retiree’s health plan, the retiree will be

responsible for the full premium price. Retirees who had obtained

employer-sponsored coverage through a Medicare+Choice plan could

potentially face similar challenges in terms of limited choice and coverage

and higher costs in the event that health plans were no longer available,

such as when a Medicare+Choice plan withdraws from the market.

Regardless of how they lose their employer-sponsored coverage,

 26Federal Medigap protections include “guaranteed issue” rights, which provide certain

individuals access to a limited number of Medigap products at a time other than when they

are first eligible for Medicare. For example, individuals are eligible for at least four

Medigap plans if their employer eliminates retiree benefits, or if their managed care plan or

traditional Medicare plan provider leaves the program or stops serving their area, provided

they apply for coverage no later than 63 days after their health coverage ends. Depending

on the state and the health status of the applicant, carriers may choose to offer more than

these four plans to qualified individuals. In addition to these federal protections, 21 states

provide for additional Medigap protections, according to HCFA’s 2000 Guide to Health

Insurance for People with Medicare.

27The standardized plans, called A through J, differ in the benefits they provide. For

example, plan A provides basic (core) benefits, whereas plans H, I, and J provide more

comprehensive benefits, including limited prescription drug coverage. (See appendix III for

a description of the Medigap benefits included in some standardized plans.) Massachusetts,

Minnesota, and Wisconsin are exempt from providing the standard plans because they

standardized their Medigap policies prior to the establishment of the federal standardized

plans A through J.

28Moreover, Medigap prescription drug coverage is limited. For example, after an individual

pays a $250 deductible, plans H and I cover 50 percent of prescription drug costs up to a

maximum of $1,250 per year. Plan J offers a somewhat more extensive prescription drug

benefit; after an enrollee pays the $250 deductible, the plan covers 50 percent of

prescription drug costs up to a maximum of $3,000 per year.
Page 24 GAO-01-374 Retiree Health Benefits

purchasing Medigap coverage may be a costly alternative for many

retirees. Table 4 shows examples of premiums for several popular

Medigap plans in selected states.29

Table 4: Sample Monthly Premiums for a 65-Year-Old for Three Medigap Plans in

Four Areas

Plan C Plan F Plan H

Chicago, Illinois $85 $94 Not offered

Tampa, Florida $117 $129 $170

North Carolina (statewide) $112 $100 $152

Denver, Colorado $129 $135 $175

Note: The cost of Medigap policies varies considerably among carriers, although the benefits are

identical. We obtained premium prices for Medigap policies from one of the largest Medigap carriers

in each state, according to state insurance department representatives. The cited rates were

applicable in 2000 for all places but Tampa, Florida, where the rates were effective as of December

1999.

Plan F is the most popular Medigap plan. According to data from the National Association Insurance

Commissioners, plans C and F together represent over 60 percent of all Medigap sales. Plan H is one

of the three standardized plans that include a limited prescription drug benefit. Under the federal

Medigap special enrollment rules, eligible individuals have guaranteed access to four plans, including

plans C and F. In contrast, access to plan H may be subject to medical underwriting.

Source: GAO review of Medigap premiums obtained from state insurance departments.

Premium increases and forecasts for a potential economic slowdown

could pose concerns for many employers and may make employersponsored benefits vulnerable to further erosion. In the longer term, these

factors, coupled with the potential for Medicare reforms and an increasing

number of aging baby boomers, may produce even more uncertainty and

cost pressures for employers. Consequently, as the number of retirees

without employer-based coverage increases, retirees, particularly those in

poorer health, may encounter difficulty finding affordable alternative

health coverage.

We provided a draft of this report to the Department of Labor and several

expert reviewers for comments. The reviewers provided technical

comments that we incorporated as appropriate.

 29A HCFA official said that Medicare requires all carriers participating in the Medigap

market to offer plan A. In addition to plan A, carriers can opt to provide any combination of

the remaining nine supplemental policies. For nationwide examples of Medigap premiums,

see Medigap: Premiums for Standardized Plans That Cover Prescription Drugs

(GAO/HEHS-00-70R, Mar. 1, 2000).

Concluding

Observations

Agency Comments
Page 25 GAO-01-374 Retiree Health Benefits

As agreed with your office, unless you announce the report’s contents

earlier, we plan no further distribution of it until 30 days after its issue

date. We will then send copies to the Honorable Elaine Chao, Secretary of

Labor; the Honorable Michael McMullan, Acting Administrator of the

Health Care Financing Administration; and other interested congressional

committees and members and agency officials. We will also make copies

available to others on request.

Please call me at (202) 512-7118 if you have any questions. Another contact

and major contributors are listed in appendix IV.

Sincerely yours,

Kathryn G. Allen

Director, Health Care— Medicaid

 and Private Health Insurance Issues
Appendix I: Methodology

Page 26 GAO-01-374 Retiree Health Benefits

In conducting our study, we reviewed available employer survey data,

analyzed the March supplements of the Census Bureau’s 1995 to 2000

Current Population Survey, reviewed applicable laws and court decisions

pertaining to changes in employer-sponsored coverage, obtained

individual insurance market premiums from carriers, and interviewed

employee benefit consulting firms and several large employers. We

conducted our work from June 2000 through February 2001 in accordance

with generally accepted government auditing standards.

For information on the extent to which employers offer health coverage to

retirees as well as the conditions under which coverage is made available,

we relied on private employer benefit surveys, specifically those of (1) the

Health Research and Educational Trust (HRET) sponsored by the Kaiser

Family Foundation (and formerly produced by KPMG Peat Marwick) and

(2) William M. Mercer, Incorporated (which were formerly produced by

Foster Higgins). These surveys have more current or comprehensive

information on retiree health benefits than do existing surveys conducted

by the federal government. Also, these surveys are distinguished from a

number of other private ones not only by their content but also by their

large random samples, which allow their results to be generalized to a

larger population of employers. Neither survey, however, reports sufficient

information about its sampling errors to determine the precision of its

estimates, although the Kaiser/HRET survey notes that year-to-year

changes in the percentage of employers offering retiree health benefits

have not been significant since 1998.

The Kaiser/HRET surveys are based on samples of employers with three or

more employees selected from a Dun and Bradstreet list of private and

public employers. For some retiree health benefit questions, the

Kaiser/HRET survey limits its reported data to employers with 200 or more

employees. The Kaiser/HRET surveys’ sample size was about 1,800 in 1993

and 1,887 in 2000, with response rates of 55 percent and 45 percent,

respectively (see table 5 for additional information on the Kaiser/HRET

sample by firm size).

Appendix I: Methodology

Surveys on EmployerSponsored Retiree

Health Insurance
Appendix I: Methodology

Page 27 GAO-01-374 Retiree Health Benefits

Table 5: 2000 Kaiser/HRET Sample by Firm Size

Firm size Sample size

Fewer than 200 employees 843

200 to 999 employees 363

1,000 to 4,999 employees 367

5,000 or more employees 314

Source: Kaiser/HRET Employer Health Benefits, 2000 Annual Survey.

The Mercer/Foster Higgins surveys are based on samples of employers

with 10 or more employees selected from the Dun and Bradstreet database

for private firms and the Census of Governments for government agencies.

For some retiree health benefit questions, the Mercer survey limits its

reported data to employers with 500 or more employees. The Mercer

survey’s sample size was about 3,676 in 1993, with a response rate of 78

percent. In 2000, Mercer’s database contained 2,797 responses from its

random sample—a response rate of about 50 percent.

We relied on the Census Bureau’s March supplement of the Current

Population Survey (CPS) for information on the demographic

characteristics of retirees and their access to insurance. The survey is

based on a sample designed to represent a cross-section of the nation’s

civilian noninstitutional population. In March 2000, about 60,000

households were sampled for the survey, and about 47,000 of them,

containing approximately 94,000 persons 15 years of age or older, were

interviewed. The total response rate for the 2000 CPS March supplement

was about 86 percent.

Because the CPS is based on a sample, any estimates derived from the

survey are subject to sampling errors. A sampling error indicates how

closely the results from a particular sample would be reproduced if a

complete count of the population were taken with the same measurement

methods. To minimize the chances of citing differences that could be

attributable to sampling errors, we highlight only those differences that

are statistically significant at the 95 percent confidence level.

The following provides more detail on how some of the CPS questions are

phrased and how the responses are categorized, including some

clarifications and limitations.

Current Population

Survey
Appendix I: Methodology

Page 28 GAO-01-374 Retiree Health Benefits

The CPS asks whether a respondent was covered by employer/unionsponsored, Medicare, Medicaid, private individual, or certain other types

of health insurance in the last year. Thus, the 2000 CPS asked what

coverage an individual might have had in 1999. Until recently, individuals

were not asked directly whether they were uninsured, but were deemed to

be so if they denied having any of the above sources of coverage. As a

result, the CPS is believed to have slightly overestimated the number of

people who are uninsured. Beginning in 2000, the CPS insurance questions

are being revised so that individuals who report no health insurance are

specifically asked if they are uninsured; however, the Census Bureau has

not yet reported the responses to this question.

Another limitation to the CPS insurance questions is that they do not ask

how long an individual had each source of insurance or whether the

individual was covered through any source(s) at the time of the interview.

Thus, the CPS considers a person to be insured even if he or she was

covered for only 1 day in the past year, and regardless of whether the

person was insured on the day of the interview. However, some

individuals may respond with their current insurance status rather than

their coverage for the past year.

Because some people may receive coverage from several sources, we

prioritized the source of insurance individuals reported to avoid double

counting. That is, if individuals reported having coverage from two or

more kinds of insurance, we assigned them to one type based on a

hierarchy. Specifically, employer-sponsored coverage was considered

primary to other sources of coverage for individuals less than 65 years of

age, and respondents were classified as having employer-sponsored

coverage even if they also had other types of coverage. The other types of

health insurance were prioritized in the following order: Medicare,

Medicaid, military/veterans, and individual insurance. For people 65 years

of age or older, we first determined whether an individual had Medicare

and then prioritized any remaining coverage in the following order:

employer-sponsored, Medicaid, military/veterans, and individual

insurance.

The CPS also asks whether employer-sponsored insurance is provided “in

their own name” or as a dependent of another policyholder. We primarily

focused on whether retired individuals had employer-sponsored health

insurance coverage in their own names because this coverage can most

directly be considered retiree health coverage from a former employer.

Insurance Status
Appendix I: Methodology

Page 29 GAO-01-374 Retiree Health Benefits

The CPS questions that we used for employment status are similar to those

on insurance status. Respondents are considered employed if they worked

at all in the past year and not employed only if they did not work at all

during the past 12 months.

We reviewed applicable laws and court decisions pertaining to changes in

employer-sponsored coverage. Appendix II presents additional

information on the results of this review.

We contacted health insurance carriers in certain states with limited rating

restrictions to obtain premiums for individual market policies available to

applicants who were 30 and 60 years old. Similarly, we contacted several

state insurance departments to obtain premium prices of Medigap policies

available to eligible individuals. From carriers, we also obtained

information on the kinds of health conditions that may be excluded from

coverage or for which an applicant may be denied coverage altogether.

For additional information on current and prospective changes to

employer-sponsored retiree health benefits, we interviewed and obtained

documents from several global employee benefits consulting firms. In

addition, we contacted selected large employers for information on the

kinds of changes they had made to their retiree health benefits as well as

the factors that had led to these changes.

Employment Status

Legal Review

Insurance Premiums

Interviews With

Employee Benefit

Consulting Firms and

Employers
Appendix II: Case Law Review of Changes to

Employer-Sponsored Retiree Health Benefits

Page 30 GAO-01-374 Retiree Health Benefits

Although employers often provide health benefits to retirees, they are not

required to do so. However, employers that provide retiree health benefits

are responsible for acting consistent with certain administrative and

fiduciary requirements established by the Employee Retirement Income

Security Act of 1974 (ERISA). In most retiree health benefit litigation,

retirees have sought to restore health benefits that have been reduced or

eliminated by alleging that the employer breached representations made

about the quality, extent, and duration of retiree health benefits. Courts

generally have ruled that an employer can modify or terminate health care

benefits provided to retirees if the employer specifically had reserved that

right in health benefit documents or collective bargaining agreements. A

recent Third Circuit Court decision, which focused on whether differences

in health benefits provided to Medicare-eligible retirees and retirees not

yet eligible for Medicare violated the Age Discrimination in Employment

Act (ADEA), could influence employer decisions on whether to continue

retiree health benefits.

Employer-sponsored retiree health benefits are considered welfare

benefits under Title I of ERISA.1

 To ensure a uniform federal law

governing employee benefit plans,2

 ERISA generally preempts all state law

as it may pertain to employee benefit plans covered under its jurisdiction.3

Under ERISA, private employers who choose to provide retiree health

benefit plans must give plan participants and beneficiaries a summary plan

description (SPD) describing their rights and obligations, and are

responsible for acting consistently with certain administrative and

fiduciary requirements. The SPD, which must be written in a manner

intended to be understood by the average plan participant, specifies

retirees’ rights and the circumstances under which the health plan can be

modified or terminated. In addition, ERISA establishes fiduciary

standards to protect employee benefit plan participants and beneficiaries

from plan mismanagement. Generally, these standards require fiduciaries

to act with the care, skill, and diligence of a prudent person in protecting

plan participants and beneficiaries.

 1

29 U.S.C. 1001-1191c.

2

Under ERISA, employee benefit plans can be pension plans or welfare plans. Welfare plans

are specifically exempt from vesting requirements to which pension plans are subject. 29

U.S.C. 1051(1).

3

29 U.S.C. 1144.

Appendix II: Case Law Review of Changes to

Employer-Sponsored Retiree Health Benefits

ERISA Standards

Applicable to Retiree

Health Plans
Appendix II: Case Law Review of Changes to

Employer-Sponsored Retiree Health Benefits

Page 31 GAO-01-374 Retiree Health Benefits

Federal courts generally have ruled that an employer can modify or

terminate retiree health care benefits based on the fact that the employer

specifically had reserved that right in health benefit documents or

collective bargaining agreements.4

 Challenges to maintain or restore these

benefits largely have been unsuccessful.5

Generally, retirees cannot rely on oral communications or representations

that benefits would be maintained for life or without reduction.6

 ERISA

requires that every plan be established and maintained under a written

instrument.7

 Thus, courts look to plan documents including the terms of

the SPD to determine if the plan precludes an employer from modifying or

terminating benefits. Courts, however, are divided on whether the

reservation clause must be contained in the SPD. Several courts have held

that, inasmuch as the SPD is an employee’s primary source of information

regarding employment benefits, employees are entitled to rely on the

descriptions in the summary.8

 However, at least one appellate court has

ruled that an employer reserved the right to amend or terminate health

 4

See, e.g., Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995) (Employers “are

generally free under ERISA, for any reason at any time, to adopt, modify, or terminate

welfare plans.”)

5

Some courts, however, have recognized exceptions for fraud or misrepresentation.

Challenges to salaried retiree health benefits modifications are brought exclusively under

section 502(a)(1)(B) of ERISA, 29 U.S.C. 1132(a)(1)(B).

6

In re Unisys Corp. Retiree Medical Benefits ERISA Litigation, 58 F.3d 896, 902 (3d Cir.

1995) (“the written terms of the plan documents control and cannot be modified or

superseded by the employer’s oral undertakings”), cert. denied sub nom Unisys Corp. v.

Pickering, 517 U.S. 1103 (1996).

7

29 U.S.C. 1102(a)(1); Musto v. American General Corp., 861 F.2d 897, 910 (6th Cir. 1988)

(“we are quite certain that Congress, in passing ERISA, did not intend that participants in

employee benefit plans should be left to the uncertainties of oral communications in

finding out precisely what rights they were given under their plan”), cert. denied, 490 U.S.

1020 (1989).

8

Barker v. Ceridian Corp., 193 F.3d 976, 983 (8th Cir. 1999) (“Where the formal plan and

summary plan description conflict, the employer is bound by the summary plan

description.”), cert. denied, 120 S. Ct. 1963 (2000); Helwig v. Kelser-Hayes Co., 93 F.3d 243

(6th Cir. 1996); cert. denied, 519 U.S. 1059 (1997); Pierce v. Security Trust Life Ins. Co., 979

F.2d 23, 27 (4th Cir. 1992).

Employers’ Rights to

Modify or Terminate

Health Benefits
Appendix II: Case Law Review of Changes to

Employer-Sponsored Retiree Health Benefits

Page 32 GAO-01-374 Retiree Health Benefits

benefits if the reservation clause is in other plan documents, even if it is

not mentioned in the SPD.9

Retirees receiving health benefits under collective bargaining agreements

have fared only slightly better than salaried retirees in litigation.10 Absent a

finding that the parties intended that the health benefits were to be

maintained for the retiree’s life or some period beyond the expiration of

the agreements, courts generally view these benefits as ending at the

expiration of the agreements.

In one of the earliest collectively bargained contract cases, UAW v. YardMan, Inc.,

11 the court noted that any right to lifetime benefits must be

based on the contract. The contract contained the promise that the

company will provide insurance to retired employees, which reasonably

could be construed either as a reference to the nature of retiree benefits or

as creating a benefit continuing beyond the life of the agreement. The

court resolved the ambiguity by looking to other provisions of the

collective bargaining agreement for evidence of intent and an

interpretation in accord with the entire document. From that examination,

the court concluded that the parties had intended to create insurance

benefits that continued beyond the life of the collective bargaining

agreement.12

The court noted that retiree benefits were permissive not mandatory

subjects of collective bargaining, and that “it is unlikely that such benefits,

which are typically understood as a form of delayed compensation or

reward for past services, would be left to the contingencies of future

negotiations.” The court characterized retiree health benefits as “status”

 9

Sprague v. General Motors Corp. 133 F.3d 388, 400 (6th Cir. 1998) (“Not all of the

summaries clearly stated that GM could amend or terminate the plan. But the failure to

allude to this power in some of the booklets did not prejudice GM’s right, clearly stated in

the plan itself, to change the plan’s terms”), cert. denied, 524 U.S. 923 (1998).

10Typically, litigation by former union employees receiving retirement health benefits has

been filed under section 301 of the Labor Management Relations Act, 29 U.S.C. 185, and

section 502(a)(1)(B) of Title I of ERISA, 29 U.S.C. 1132(a)(1)(B).

11716 F.2d 1476 (6th Cir. 1983), cert. denied, 465 U.S. 1007 (1984).

12Id. At 1479-81.
Appendix II: Case Law Review of Changes to

Employer-Sponsored Retiree Health Benefits

Page 33 GAO-01-374 Retiree Health Benefits

benefits carrying with them “an inference that they continue so long as the

prerequisite status is maintained.” 13

The Yard-Man case served to spur some, but not all, courts into concluding

that collective bargaining agreement language that appeared to require the

continuation of retiree health benefits should require employers to provide

those benefits.14 The First, Fourth, Sixth, and Eleventh Circuits have

followed the “inference” standard first articulated in Yard-Man.15 The Fifth

Circuit has questioned the inference.16 The Eighth Circuit has rejected the

inference that employees engaged in collective bargaining are forgoing

wages in consideration for retiree health benefits.17 The Seventh Circuit

has also rejected the inference altogether, observing that the courts in this

circuit do not distinguish between collective bargaining agreements and

ERISA plans for this purpose.18

Claims of some retirees that modification or termination of their retiree

health benefits constitutes a breach of fiduciary duty have, by and large,

been denied.19 However, the Supreme Court articulated a standard for

fiduciary liability in certain limited instances, finding that an employer

 13Id. At 1482.

14United Steelworkers of America v. Conners Steel Co., 855 F.2d 1499 (11th Cir. 1988), cert.

denied, 489 U.S. 1096 (1988); Policy v. Power Pressed Steel Co., 770 F.2d 609 (6th Cir.

1985), cert. denied, 475 U.S. 1017 (1986).

15See United Steelworkers v. Textron, Inc., 836 F.2d 6 (1st Cir. 1987; Keffer v. H.K. Porter

Co., 872 F.2d 60 (4th Cir. 1989); Golden v. Kelsey-Hayes Co., 73 F.3d 648 (6th Cir. 1996);

Smith v. ABS Industries, Inc., 890 F.2d 841 (6th Cir. 1989); United Steelworkers of America

v. Conners Steel, 855 F.2d 1499 (11th Cir. 1988)).

16United Paperworkers International Union v. Champion International Corp., 908 F.2d 1252,

1261 n. 12 (5th Cir. 1990) (“we find no basis in logic or federal labor policy for such a broad

inference.”) See also International Association of Machinists v. Masonite Corp., 122 F.3d

228, 231 (5th Cir. 1997).

17In Anderson v. Alpha Portland Industries, Inc., the court concluded that retiree health and

life insurance benefits were not vested for the lifetime of the retiree, but were intended to

last only for the duration of the collective bargaining agreement. 836 F.2d 1512, 1517 (8th

Cir. 1988), (“We believe that it is not at all inconsistent with labor policy to require

plaintiffs to prove their case without the aid of gratuitous inferences.”) cert. denied sub

nom, Anderson v. Slattery Group. Inc., 489 U.S. 1051 (1989).

18Rosetto v. Pabst Brewing Company, Inc., 217 F3d 539, 544 (7th Circ 2000).

19See, e.g., id. at 817-818; Musto v. American General Corp., 861 F.2d 897, 912 (6th Cir. 1988)

(“when an employer decides to establish, amend, or terminate a benefits plan, . . . its

actions are not to be judged by fiduciary standards.”)
Appendix II: Case Law Review of Changes to

Employer-Sponsored Retiree Health Benefits

Page 34 GAO-01-374 Retiree Health Benefits

acted as a fiduciary when it intentionally misled employees about the

future and security of benefits.20 The Third Circuit has detailed four

elements retirees must demonstrate to succeed in a breach of fiduciary

duty claim: proof of fiduciary status, misrepresentations by the company,

company knowledge of the confusion created, and resulting harm to the

employees.21

The decision in Erie County Retirees Association v. County of Erie22 raises

a new issue in evaluating retiree health benefits and could affect an

employer’s continued provision of these benefits. Erie County selected a

health plan for Medicare-eligible retirees that limited choice of a primary

care physician and reimbursed for services, except emergencies, only if

authorized by the primary care physician. However, unlike a traditional

indemnity plan, there were no deductibles and few or no copayments. For

former employees not yet Medicare-eligible, the county selected a hybrid

point-of-service plan under which a retiree could choose an HMO option

(and accept its benefits and limitations) or a traditional indemnity option.

The Medicare-eligible retirees filed suit against Erie County, contending

that the health coverage offered to them was inferior to that offered to

retirees under 65, and therefore they were discriminated against based on

section 4(a) of the Age Discrimination in Employment Act (ADEA).23

The Third Circuit ruled that Erie County treated its Medicare-eligible

retirees differently from other retirees with respect to their compensation,

terms, condition, or privileges of employment because of age, establishing

a claim under the ADEA. The court also ruled that, under the act,24 the

 20Variety v. Howe, 516 U.S. 489 (1996).

21In Re Unisys Corp. Retiree Medical Benefits ERISA Litigation, 957 F. Supp. 628 (E.D. Pa.

1997), citing In Re Unisys Corp. Retiree Medical Benefits ERISA Litigation, 57 F.3d 1255,

1265 (3d Cir. 1995), cert. denied sub nom Unisys Corp. v. Pickering, 517 U.S. 1103 (1996).

22220 F.3d 193 (3d Cir. 2000), cert. denied, 69 U.S.L.W. 3409 (U.S. Mar. 5, 2001) (No. 00-906).

2329 U.S.C. 623(a) (“It shall be unlawful for an employer . . . to . . . discriminate against any

individual with respect to his compensation, terms, conditions, or privileges of

employment, because of . . . age.”)

2429 U.S.C. 623(f)(2)(B)(i) provides an exception for what would otherwise be a violation of

the ADEA where “the actual amount of payment made or cost incurred on behalf of an

older worker is no less than that made or incurred on behalf of a younger worker.” The

implementing regulation, 29 C.F.R. 1625.10, established what is known as the “equal benefit

or equal cost” rule.

Recent Decision

Raises Age

Discrimination Issues

Regarding Retiree

Health Benefits
Appendix II: Case Law Review of Changes to

Employer-Sponsored Retiree Health Benefits

Page 35 GAO-01-374 Retiree Health Benefits

employer could provide different benefits to Medicare-eligible retirees

only if (1) they provided equal benefits to those provided to retirees not

yet eligible for Medicare or (2) the employer’s costs for Medicare-eligible

retirees and retirees not yet eligible for Medicare were equal. The case was

sent back to the trial court for a determination on the county’s compliance

with this “equal benefit or equal cost” rule.
Appendix III: Benefit Summaries for Selected

Medigap Policies

Page 36 GAO-01-374 Retiree Health Benefits

The 10 standardized Medigap policies, called plans A through J, differ by

the benefits they provide. However, all 10 plans include the same “basic

benefits,” including Part A hospitalization coinsurance (days 61 to 90),

lifetime reserve coinsurance (days 91 to 150), 365 extra days of hospital

care, the first 3 pints of blood or equivalent quantities of packed red blood

cells per calendar year that Medicare Parts A and B do not cover, and Part

B coinsurance (20 percent).

Individuals can purchase a Medigap plan with additional benefits, although

the extent to which the 10 plans offer these various benefits differs. (Table

6 illustrates benefit differences among the three plans for which we

obtained premium rates.) Plan F is the most popular Medigap plan.

According to a HCFA official, plans C and F together represent over one

half of all Medigap sales. Plan H is one of the three standardized plans that

include a limited prescription drug benefit. Under Medigap’s special

enrollment rules, eligible individuals have guaranteed access to four plans,

including plans C and F. In contrast, access to plan H may be subject to

medical underwriting.

Table 6: Additional Medigap Benefits for Plans C, F, and H

Plan C Plan F Plan H

Additional benefits X X X

Skilled nursing facility coinsurance (days 21-100) X X X

Part A deductible X X X

Part B deductible X X

Part B excess charges Xa

Foreign travel emergency X X

At-home recovery

Prescription drugs X

Preventive medical care

a

Plan F covers 100 percent of excess charges, which is the difference between the doctor’s charge

and Medicare’s approved amount.

Appendix III: Benefit Summaries for Selected

Medigap Policies
Appendix IV: GAO Contact and Staff

Acknowledgments

Page 37 GAO-01-374 Retiree Health Benefits

John Dicken, (202) 512-7043

In addition to the above staff member named, Susan Anthony, Carmen

Rivera-Lowitt, and Mark Vinkenes made key contributions to this report.

Paula Bonin provided computer programming for the analysis of the CPS,

and Dayna Shah and Roger Thomas provided a legal review of relevant

statutes and court decisions.

Appendix IV: GAO Contact and Staff

Acknowledgments

GAO Contact

Staff

Acknowledgments
Related GAO Products

Page 38 GAO-01-374 Retiree Health Benefits

Medicare+Choice: Plan Withdrawals Indicate Difficulty of Providing

Choice While Achieving Savings (GAO/HEHS-00-183, Sept. 7, 2000).

Medigap: Premiums for Standardized Plans That Cover Prescription Drugs

(GAO/HEHS-00-70R, Mar. 1, 2000).

Prescription Drugs: Increasing Medicare Beneficiary Access and Related

Implications (GAO/T-HEHS/AIMD-00-100, Feb. 16, 2000).

Private Health Insurance: Progress and Challenges in Implementing 1996

Federal Standards (GAO/HEHS-99-100, May 12, 1999).

Private Health Insurance: Declining Employer Coverage May Affect Access

for 55- to 64-Year-Olds (GAO/HEHS-98-133, June 1, 1998).

Implementation of HIPAA: State-Designed Mechanisms for Group-toIndividual Portability (GAO/HEHS-98-161R, May 20, 1998).

Retiree Health Insurance: Erosion in Retiree Health Benefits Offered by

Large Employers (GAO/T-HEHS-98-110, Mar. 10, 1998).

Retiree Health Insurance: Erosion in Employer-Based Health Benefits for

Early Retirees (GAO/HEHS-97-150, July 11, 1997).

Private Health Insurance: Millions Relying on Individual Market Face Cost

and Coverage Trade-Offs (GAO/HEHS-97-8, Nov. 25, 1996).

Employer-Based Health Plans: Issues, Trends, and Challenges Posed by

ERISA (GAO/HEHS-96-167, July 25, 1995).

Related GAO Products

(201060)
The first copy of each GAO report is free. Additional copies of reports are

$2 each. A check or money order should be made out to the

Superintendent of Documents. VISA and MasterCard credit cards are also

accepted.

Orders for 100 or more copies to be mailed to a single address are

discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

Orders by visiting:

Room 1100

700 4th St., NW (corner of 4th and G Sts. NW)

Washington, DC 20013

Orders by phone:

(202) 512-6000

fax: (202) 512-6061

TDD (202) 512-2537

Each day, GAO issues a list of newly available reports and testimony. To

receive facsimile copies of the daily list or any list from the past 30 days,

please call (202) 512-6000 using a touchtone phone. A recorded menu will

provide information on how to obtain these lists.

Orders by Internet

For information on how to access GAO reports on the Internet, send an email message with “info” in the body to:

Info@www.gao.gov

or visit GAO’s World Wide Web home page at:

http://www.gao.gov

Contact one:

• Web site: http://www.gao.gov/fraudnet/fraudnet.htm

• E-mail: fraudnet@gao.gov

• 1-800-424-5454 (automated answering system)

Ordering Information

To Report Fraud,

Waste, and Abuse in

Federal Programs