NU Online News Service, Dec. 14, 2004, 4:40 p.m. EST

Large U.S. employers are continuing to back away from retiree health benefits.[@@]

Most employers that offered retiree health benefits this year will continue to do so in 2005. But the percentage of employers that are dropping retiree benefits for current retirees will rise to 11% in 2005, up from 8% in 2004, according to researchers at Hewitt Associates Inc., Lincolnshire, Ill., and the Henry J. Kaiser Family Foundation, Menlo Park, Calif.

The researchers based their statistics on survey responses from 333 large commercial employers.

The survey participants said the average cost of providing retiree health benefits rose about 13% in 2004.

The participants reported mixed reactions to the new Medicare Prescription Drug, Improvement and Modernization Act of 2003 drug benefits provisions.

MMA will create a new, subsidized Medicare drug benefit program, but it also created a new incentive program to encourage employers to keep existing employer-subsidized retiree drug benefits.

Although 58% of survey participants said their firms probably will keep current drug benefit programs, 17% probably will offer drug coverage only as a supplement to the Medicare plan, and 8% are likely to discontinue drug coverage, the researchers report.