Private Health Insurance

Too young to qualify for Medicare, many near elderly (55- to 64-year-olds) are considering retirement or gradually moving out of the workforce. These events may be related to declining health, job displacement, or simply the desire for more leisure time. Because health insurance for most Americans is an employment-related benefit, retirement may necessitate looking for another source of affordable coverage. However, insurance bought directly in the individual market or temporary continuation coverage purchased through an employer are typically expensive and may not always be available. Affordability, moreover, may be exacerbated by both declining health and the reduction in income associated with retirement. For some near elderly, an alternative to retiring without insurance is simply to continue working. This report assesses the ability of Americans aged 55 to 64 to obtain health benefits through the private market--either employer-based or individually purchased. GAO discusses the near elderly's (1) health, employment, income, and health insurance status; (2) ability to obtain employer-based health insurance if they retire before becoming eligible for Medicare; and (3) use of and costs associated with buying coverage through the individual market or employer-based continuation insurance. GAO summarized this report in testimony before Congress; see: Private Health Insurance: Employer Coverage Trends Signal Possible Decline in Access for 55- to 64-Year-Olds, by William J. Scanlon, Director of Health Financing and Systems Issues, before the Senate Committee on Labor and Human Resources. GAO/T-HEHS-98-199, June 25 (19 pages).

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.