New Options for Retiree Health Benefits

Alternatives are emerging as employers drop retirees from group health plans.

As employers continue to drop retirees from group health plans, new alternatives are emerging that may ease the pain for seniors. A growing number of employers are making cash contributions to individual accounts that help seniors pay for insurance they shop for themselves. New private exchanges are helping retirees select their own health plans. And when health benefits evaporate in an employer's bankruptcy, recent rule changes make it easier for some early retirees to use an obscure tax credit that covers nearly 75% of their insurance premiums.

Still, the new approaches also bring challenges. Fixed employer contributions may not buy as much coverage as retirees received in their old group plans. And retirees who have long depended on an employer's plan may feel overwhelmed by the task of shopping for their own insurance. Many people have paid attention to their insurance choices only once a year at open enrollment, but "now the consumer experience is coming to health insurance," says Nate Purpura, director of consumer information at Consumers will have to be well informed, he says, and "become much more conscious of costs."

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Eleanor Laise
Senior Editor, Kiplinger's Retirement Report
Laise covers retirement issues ranging from income investing and pension plans to long-term care and estate planning. She joined Kiplinger in 2011 from the Wall Street Journal, where as a staff reporter she covered mutual funds, retirement plans and other personal finance topics. Laise was previously a senior writer at SmartMoney magazine. She started her journalism career at Bloomberg Personal Finance magazine and holds a BA in English from Columbia University.