As Medicare begins to cover prescription drugs in 2006, the biggest gap in medical benefits for most retirees will be filled. For those 65 and older, coverage from their former employer may no longer be necessary. The large-scale trend away from employer-provided retiree medical benefits not only will continue; it's likely to accelerate.While the bottom line is that U.S. companies that finance retiree medical benefits are at a competitive disadvantage compared to other companies in their industry that do not offer the benefits so that, over the long term, the inability to compete on costs may inevitably threaten the viability of any company that provides rich retiree health benefits, there is still a need for insurance coverage by those who retire before age 65. "Our challenge is to develop alternate approaches for workers to accumulate assets to cover their insurance and out-of-pocket health costs during retirement, but to do so in affordable and sustainable ways that allow U.S. companies to compete and continue to serve the needs of future retirees."
Source: "Retiree medical benefits-past, present and future" Employee Benefit News (March 2006)