EBRI issue brief / Employee Benefit Research Institute, 2006
MODELING RETIREE HEALTH COSTS: This Issue Brief examines the uncertainty of health care expenses ... more MODELING RETIREE HEALTH COSTS: This Issue Brief examines the uncertainty of health care expenses in retirement by using a Monte Carlo simulation model to estimate the amount of savings needed to cover health insurance premiums and out-of-pocket health care expenses. This type of simulation is able to account for the uncertainty related to individual mortality and rates of return, and computes the present value of the savings needed to cover health insurance premiums and out-of-pocket expenses in retirement. These observations were used to determine asset targets for having adequate savings to cover retiree health costs 50, 75, and 90 percent of the time. NOT ENOUGH SAVINGS: Many individuals will need more money than the amounts reported in this Issue Brief because this analysis does not factor in the savings needed to cover long-term care expenses, nor does it take into account the fact that many individuals retire prior to becoming eligible for Medicare. However, some workers will need to save less than what is reported if they keep working in retirement and receive health benefits as active workers. WHO HAS RETIREE HEALTH BENEFITS BEYOND MEDICARE?: About 12 percent of private-sector employers report offering any Medicare supplemental health insurance. This increases to about 40 percent among large employers. Overall, nearly 22 percent of retirees age 65 and older had retiree health benefits in 2005 to supplement Medicare coverage. As recently as 2006, 53 percent of retirees age 65 and older were covered by Medicare Part D, 24 percent had outpatient prescription drug coverage through an employment-based plan. Only 10 percent had no prescription drug coverage. INDIVIDUALLY PURCHASED MEDICARE SUPPLEMENTS, 2008: Among those who purchase Medigap and Medicare Part D prescription drug coverage at age 65 in 2008, men would need between $79,000 and $159,000 with median prescription drug expenses (50th percentile and 90th percentiles, respectively), and between $156,000 and $331,000 with prescription spending that is at the 90th percentile. Women would need between $108,000 and $184,000 with median prescription drug expenses (50th and 90th percentiles, respectively), and between $217,000 and $390,000 with prescription spending that is at the 90th percentile. The savings needed for couples would range from $194,000 at the 50th percentile to $635,000 at the 90th percentile. EMPLOYMENT-BASED BENEFITS, 2008: Among those who have employment-based retiree health benefits to supplement Medicare, but who must pay their own premiums, men would need between $102,000 and $196,000 in current savings (50th and 90th percentiles, respectively) to cover health care costs in retirement. Women would need between $137,000 and $224,000, respectively, due to their greater longevity. The savings needed for couples would range from $154,000 to $376,000. INDIVIDUALLY PURCHASED MEDICARE SUPPLEMENTS, 2018: Among those who purchase Medigap and Medicare Part D prescription drug coverage at age 65 in 2018 (currently age 55), men would need between $132,000 and $266,000 with median prescription drug expenses (50th and 90th percentiles, respectively), and between $261,000 and $555,000 with prescription spending that is at the 90th percentile. Women would need between $181,000 and S308,000 with median prescription drug expenses (50th and 90th percentiles), and between S364,000 and $654,000 with prescription spending that is at the 90th percentile. The savings needed for couples would range from $325,000 at the 50th percentile to S1,064,000 at the 90th percentile. RETIREE HEALTH MAY BE DRIVING LONGER TIME IN THE WORK FORCE: The declining availability of retiree health benefits may partly explain the rising labor force participation rate among individuals ages 55-64. Between 1996 and 2006, the labor force participation rate increased from 67 percent to 69.6 percent for men and from 49.6 percent to 58.2 percent for women.
To the degree that young and healthy workers leave the employment-based system, workers remaining... more To the degree that young and healthy workers leave the employment-based system, workers remaining in the system will be disproportionately older and unhealthy, which will drive up premiums in the system. As premiums increase, the youngest/healthiest workers will move to the non-group market, leaving relatively older/less healthy workers in the employment-based system, which will continue to drive up premiums for employer coverage. This phenomenon is known as the "death spiral" because it means the death of employment-based health benefits as a result of continued and increased adverse selection. Were the employment-based system go into the death spiral, employers could eventually drop coverage.
EBRI issue brief / Employee Benefit Research Institute, 2010
UPDATED MODELING: This report updates earlier modeling by EBRI on the level of savings needed for... more UPDATED MODELING: This report updates earlier modeling by EBRI on the level of savings needed for health care expenses in retirement. Some prior estimates have been significantly revised down as a result of changes to Medicare Part D cost sharing that will be phased in by 2020 due to recently enacted health reform. However, the research indicates that retirees will continue to need a substantial amount of savings to cover their health care expenses in retirement, and that uncertainty related to health care use, prescription drug use, and longevity will still play a major role in planning for retiree health care. As before, EBRI's research shows that women will need significantly higher levels of savings than men, due to their greater longevity. Results are shown by the desired level of probability (50, 75, and 90 percent) of having enough savings to cover health costs in retirement. SAVINGS TO SUPPLEMENT MEDICARE WITH MEDIGAP AND PART D: EBRI finds that a man with median drug ex...
Issue Brief ® • This Issue Brief presents a comprehensive description of contingent workers and w... more Issue Brief ® • This Issue Brief presents a comprehensive description of contingent workers and workers in alternative work arrangements. The report discusses the advantages and disadvantages of contingent employment to both employers and workers. It describes recent trends in the use of contingent employment, characteristics of contingent workers and workers in alternative work arrangements, and these workers' employee benefits. The report also identifies public policy issues. • In 1995, contingent workers accounted for between 2.2 percent and 4.9 percent of the labor force, and workers in alternative work arrangements accounted for 9.9 percent of total employment. By 1997, the contingent work force had declined slightly, ranging from 1.9 percent to 4.4 percent, while the percentage of workers in alternative arrangements remained the same. The decline in contingent work between 1995 and 1997 could be the result of the strong economy, especially if there was an increase in the n...
EBRI issue brief / Employee Benefit Research Institute, 2006
MODELING RETIREE HEALTH COSTS: This Issue Brief examines the uncertainty of health care expenses ... more MODELING RETIREE HEALTH COSTS: This Issue Brief examines the uncertainty of health care expenses in retirement by using a Monte Carlo simulation model to estimate the amount of savings needed to cover health insurance premiums and out-of-pocket health care expenses. This type of simulation is able to account for the uncertainty related to individual mortality and rates of return, and computes the present value of the savings needed to cover health insurance premiums and out-of-pocket expenses in retirement. These observations were used to determine asset targets for having adequate savings to cover retiree health costs 50, 75, and 90 percent of the time. NOT ENOUGH SAVINGS: Many individuals will need more money than the amounts reported in this Issue Brief because this analysis does not factor in the savings needed to cover long-term care expenses, nor does it take into account the fact that many individuals retire prior to becoming eligible for Medicare. However, some workers will need to save less than what is reported if they keep working in retirement and receive health benefits as active workers. WHO HAS RETIREE HEALTH BENEFITS BEYOND MEDICARE?: About 12 percent of private-sector employers report offering any Medicare supplemental health insurance. This increases to about 40 percent among large employers. Overall, nearly 22 percent of retirees age 65 and older had retiree health benefits in 2005 to supplement Medicare coverage. As recently as 2006, 53 percent of retirees age 65 and older were covered by Medicare Part D, 24 percent had outpatient prescription drug coverage through an employment-based plan. Only 10 percent had no prescription drug coverage. INDIVIDUALLY PURCHASED MEDICARE SUPPLEMENTS, 2008: Among those who purchase Medigap and Medicare Part D prescription drug coverage at age 65 in 2008, men would need between $79,000 and $159,000 with median prescription drug expenses (50th percentile and 90th percentiles, respectively), and between $156,000 and $331,000 with prescription spending that is at the 90th percentile. Women would need between $108,000 and $184,000 with median prescription drug expenses (50th and 90th percentiles, respectively), and between $217,000 and $390,000 with prescription spending that is at the 90th percentile. The savings needed for couples would range from $194,000 at the 50th percentile to $635,000 at the 90th percentile. EMPLOYMENT-BASED BENEFITS, 2008: Among those who have employment-based retiree health benefits to supplement Medicare, but who must pay their own premiums, men would need between $102,000 and $196,000 in current savings (50th and 90th percentiles, respectively) to cover health care costs in retirement. Women would need between $137,000 and $224,000, respectively, due to their greater longevity. The savings needed for couples would range from $154,000 to $376,000. INDIVIDUALLY PURCHASED MEDICARE SUPPLEMENTS, 2018: Among those who purchase Medigap and Medicare Part D prescription drug coverage at age 65 in 2018 (currently age 55), men would need between $132,000 and $266,000 with median prescription drug expenses (50th and 90th percentiles, respectively), and between $261,000 and $555,000 with prescription spending that is at the 90th percentile. Women would need between $181,000 and S308,000 with median prescription drug expenses (50th and 90th percentiles), and between S364,000 and $654,000 with prescription spending that is at the 90th percentile. The savings needed for couples would range from $325,000 at the 50th percentile to S1,064,000 at the 90th percentile. RETIREE HEALTH MAY BE DRIVING LONGER TIME IN THE WORK FORCE: The declining availability of retiree health benefits may partly explain the rising labor force participation rate among individuals ages 55-64. Between 1996 and 2006, the labor force participation rate increased from 67 percent to 69.6 percent for men and from 49.6 percent to 58.2 percent for women.
To the degree that young and healthy workers leave the employment-based system, workers remaining... more To the degree that young and healthy workers leave the employment-based system, workers remaining in the system will be disproportionately older and unhealthy, which will drive up premiums in the system. As premiums increase, the youngest/healthiest workers will move to the non-group market, leaving relatively older/less healthy workers in the employment-based system, which will continue to drive up premiums for employer coverage. This phenomenon is known as the "death spiral" because it means the death of employment-based health benefits as a result of continued and increased adverse selection. Were the employment-based system go into the death spiral, employers could eventually drop coverage.
EBRI issue brief / Employee Benefit Research Institute, 2010
UPDATED MODELING: This report updates earlier modeling by EBRI on the level of savings needed for... more UPDATED MODELING: This report updates earlier modeling by EBRI on the level of savings needed for health care expenses in retirement. Some prior estimates have been significantly revised down as a result of changes to Medicare Part D cost sharing that will be phased in by 2020 due to recently enacted health reform. However, the research indicates that retirees will continue to need a substantial amount of savings to cover their health care expenses in retirement, and that uncertainty related to health care use, prescription drug use, and longevity will still play a major role in planning for retiree health care. As before, EBRI's research shows that women will need significantly higher levels of savings than men, due to their greater longevity. Results are shown by the desired level of probability (50, 75, and 90 percent) of having enough savings to cover health costs in retirement. SAVINGS TO SUPPLEMENT MEDICARE WITH MEDIGAP AND PART D: EBRI finds that a man with median drug ex...
Issue Brief ® • This Issue Brief presents a comprehensive description of contingent workers and w... more Issue Brief ® • This Issue Brief presents a comprehensive description of contingent workers and workers in alternative work arrangements. The report discusses the advantages and disadvantages of contingent employment to both employers and workers. It describes recent trends in the use of contingent employment, characteristics of contingent workers and workers in alternative work arrangements, and these workers' employee benefits. The report also identifies public policy issues. • In 1995, contingent workers accounted for between 2.2 percent and 4.9 percent of the labor force, and workers in alternative work arrangements accounted for 9.9 percent of total employment. By 1997, the contingent work force had declined slightly, ranging from 1.9 percent to 4.4 percent, while the percentage of workers in alternative arrangements remained the same. The decline in contingent work between 1995 and 1997 could be the result of the strong economy, especially if there was an increase in the n...
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