Cecily O'Connor
RedwoodAge.com

Many boomers in their late 50s and early 60s want to retire, but are staying on the job longer because there are few affordable heath insurance options to bridge the gap before they are eligible for Medicare. 

In recent years, many large organizations have reduced retiree healthcare subsidies or eliminated coverage altogether as part of corporate belt tightening, according to a white paper by Kenneth Sperling, senior vice president at Cigna HealthCare Senior & Retiree Services. Even with reduced offerings by employers, the insurance market has not yet responded with products and services that meet needs of retirees. 

"The end result of this mismatch is a larger workforce issue, keeping older Americans in jobs when they want to retire due to their inability to access and/or afford retiree health care coverage before they reach the age of Medicare eligibility," Sperling said. "If the solution to Medicare's current fiscal woes ends up raising the age beyond 65, this problem will only intensify."

About 33 percent of employers with 200 workers now offer retiree health benefits, down from 66 percent in 1988, according to a 2007 Kaiser health benefits survey. And for small employers, benefits are almost nonexistent. 

87 million Over 50 - And Counting
In many instances, tighter financial accounting standards have spurred some large employers to limit subsidies for retiree medical expenses. As a result, benefits managers face a tough choice, Sperling said. They can invest in active employees producing income for the company, or shift some resources to "non-income producing retirees" based on their expectation of post-employment health care coverage. 

The choices that benefits managers make will have significant long-term implications. There are now 87 million people in the US over 50, and this number will increase dramatically over the next 30 years. Today, there are about 72,000 centenarians; by 2030, there will be 1 million.

Many of these aging individuals have worked several different jobs during their career, participating in benefit offerings they oversee themselves such as defined contribution 401(k) plans, rather than traditional pensions managed by employers. 

The problem cannot be addressed with a one-size-fits-all solution, since each employer is in a different position with respect to subsidies for current and future retirees, Sperling said. That means each employer needs customized coverage that would follow the needs of workers at different stages of their life, taking into account asset management, as well as health considerations. 

The thinking is that as people's financial priorities change during their lives, their health insurance priorities change, too. For example, coverage would initially focus on prevention, followed by health maintenance and asset protection as the individual ages.

Overall, a well-planned healthcare strategy could go a long way toward slowing the demand for health care services by addressing illness and disease early. This approach would include predictive modeling to identify high risk individuals before they become high-cost claimants, Sperling said.