Retirees at Risk: The Precarious Promise of Post-Employment Health Benefits

Abstract

The American conception of retirement has received a number of significantly jarring assaults in recent years. Employers have increasingly shifted the investment risk of funding retirement to their employees by switching from so-called "traditional" defined benefit plans that promise retirees a predictable paycheck for life to defined contribution arrangements that provide no such assurances. Other employers have frozen their traditional pension plans or otherwise terminated their employees' ability to accumulate further credits toward retirement. Even President George W. Bush added to the general anxiety about income in retirement by an extended campaign in 2005 that suggested that the federal government's venerable program for funding retirement-Social Security-was hopelessly outmoded and headed toward bankruptcy. This Article examines a source of retirement anxiety that has received far less attention but is of paramount importance for prospective and current retirees alike-namely, health insurance in retirement. Indeed, the presence of retiree health insurance is one of the most significant factors determining when people choose to leave the compensated workforce, especially if declining health is one of the reasons that they are considering retirement. As an important recent study concluded, without such insurance, "current employees will have strong financial incentives to work longer and retire later." Such incentives might therefore impact employment prospects for younger workers if older workers delay their retirement. Thus, this issue is enormously important to anyone connected to the U.S. workplace, regardless of age.