Because fewer employers offer retiree health coverage as a benefit and individually purchased insurance, when available, may be prohibitively expensive, the proportion of this age group that is uninsured may rise. Individual Market. Public Insurance Programs. Finally, some beneficiaries have access to employer-based retiree health benefits, which supplement their Medicare coverage. Objectives, Scope, and Methodology

The Chairman, Senate Committee on Labor and Human Resources, asked us to assess the ability of Americans aged 55 to 64 to obtain health benefits through the employer-sponsored or individual insurance markets. He specifically asked for information on the near elderly’s (1) health, employment, income, and health insurance status; (2) ability to obtain employer-based coverage if they retire before becoming eligible for Medicare; and (3) use of and costs associated with purchasing coverage through the individual market or COBRA continuation insurance. To determine trends in employer-based health insurance coverage for those who retire before reaching Medicare eligibility, we conducted a literature review on employer-based health benefits for early retirees. Demographic and Insurance Characteristics of the Near Elderly

Because near-elderly Americans between the ages of 55 and 64 are different from younger age groups in terms of health, work, and income status, their access to and sources of health insurance also differ. Those near elderly with children see them growing up and leaving home. 2.6). 2.9). Second, the insurance status of 55- to 64-year-olds varied by the nature of their employment, that is, whom they worked for. Since employers typically cover retiree health costs as they are incurred, this liability is largely unfunded. Among the possible reasons for the mismatch between availability and coverage trends are that (1) the decision to retire is often predicated on the availability of health benefits; (2) coverage may be available through other sources, such as a working or retired spouse; (3) employers’ decisions not to offer retiree health benefits are frequently directed at future rather than current retirees; and (4) individuals may have postponed their retirement plans to avoid becoming uninsured or because of the high costs of purchasing individual insurance or COBRA continuation coverage. As noted earlier, the larger the firm, the more likely it is to offer health benefits to both active and retired workers. Only 11 percent of all beneficiaries remained enrolled for the full 18 to 36 months allowed. Observations

Forecasting the insurance status of future generations of near elderly is inherently risky. With the number of 55- to 64-year-olds estimated to grow from 8 percent of the population today to 13 percent by 2020, the impact, in the absence of affordable and accessible alternatives, could lead to an increase in the number of uninsured near-elderly Americans. Overall sample increased every 5 years. It is not difficult to imagine an individual in poor health continuing to work to maintain access to employer-based benefits that are not available to retirees. Affordability of Health Insurance for the Near Elderly

Using data from the March 1997 CPS and 1995 and 1996 information on insurance premiums, we estimated the percentage of median income that a 55- to 64-year-old would have to commit to health insurance under a number of possible scenarios, including purchasing coverage through the individual market in a community-rated state (Vermont) as well as one that had no restrictions on the premiums that could be charged (Colorado) using 1996 rates for a commonly purchased health insurance product and cost sharing under employer-based coverage using 1995 Peat Marwick estimates of the lowest, highest, and average retiree contribution.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the ability of Americans aged 55 to 64 to obtain health benefits through the private market--either employer-based or individually purchased, focusing on the near elderly's: (1) health, employment, income, and health insurance status; (2) ability to obtain employer-based health insurance if they retire before they are eligible for Medicare; and (3) use of costs associated with purchasing coverage through the individual market or employer-based continuation insurance.

What GAO Found

GAO noted that: (1) though the near elderly access health insurance differently than other segments of the under-65 population, their overall insurance picture is no worse and is better than that of some younger age groups; (2) since fewer employers are offering health coverage as a benefit to future retirees, the proportion of near elderly with access to affordable health insurance could decline; (3) the resulting increase in uninsured near elderly would be exacerbated by demographic trends, since 55- to 64-year-olds represent one of the fastest growing segments of the U.S population; (4) the current insurance status of the near elderly is largely due to: (a) the fact that many current retirees still have access to employer-based health benefits; (b) the willingness of near-elderly Americans to devote a significant portion of their income to health insurance purchased through the individual market; and (c) the availability of public programs to disabled 55- to 64-year-olds; (5) the individual market and Medicare and Medicaid for the disabled often mitigate declining access to employer-based coverage for near-elderly Americans and may prevent a larger portion of this age group from becoming uninsured; (6) the steady decline in the proportion of large employers who offer health benefits to early retirees, however, clouds the outlook for future retirees; (7) in the absence of countervailing trends, it is even less likely that future 55- to 64-year-olds will be offered health insurance as a retirement benefit, and those who are will bear an increased share of the cost; (8) although trends in employers' required retiree cost sharing are more difficult to decipher than the decisions of firms not to offer retiree health benefits, the effects may be just as troublesome for future retirees; (9) moreover, access and affordability problems may prevent future early retirees who lose employer-based health benefits from obtaining comprehensive private insurance; (10) furthermore, significant variation exists among the states that limit premiums: a few require insurers to community-rate the coverage they sell--that is, all those covered pay the same premium--while other states allow insurers to vary premiums up to 300 percent; and (11) the Consolidated Omnibus Budget Reconciliation Act is only available to retirees whose employers offer health benefits to active workers, and coverage is only temporary, ranging from 18 to 36 months.