Employee Benefits:

Company Actions to Limit Retiree Health Costs

HRD-89-31BR: Published: Feb 1, 1989. Publicly Released: Feb 1, 1989.

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Pursuant to a congressional request, GAO provided information on non-government enterprises' retiree health plans and benefits, focusing on the companies' ability to change plans and benefits.

GAO found that, of the 29 companies it surveyed: (1) all could change their health care plans to help contain costs by restricting coverage to certain participants, limiting service coverage, and requiring participants to pay more of the coverage and service costs; (2) all perceived that they had the right to modify or terminate plans, with 27 companies having explicit language in their plans reserving their rights to modify or terminate plans; (3) all changed their plans in the 4-year period ended January 1988 by adding cost-containment measures or raising participants' copayments for coverage and services; (4) all cited concerns about the necessity of more drastic measures, due to rising health care costs and the Financial Accounting Standards Board's announced intention to require companies to disclose retiree health care costs in their financial statements; and (5) 26 companies remained committed to continuing retiree health benefits, but expressed uncertainty about their ability to do so. GAO believes that options Congress could consider to increase the security of retiree health benefits include: (1) applying pension policies to retiree health benefits; and (2) requiring companies with health plans to allow retirees to purchase coverage at group rates.

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