Employer- and union-sponsored retiree health benefits are an important source of additional coverage for Medicare recipients. Retiree health plans have helped fill the gaps in Medicare benefit design by filling some or all of Medicare’s deductibles and cost-sharing requirements and offering benefits not covered by traditional Medicare, such as: Pocket editions.
Over the past 25 years, KFF has tracked trends in employer-sponsored coverage, including retiree health benefits. The 2023 KFF Employer Survey shows a decline in the share of large employers (with 200 or more employees) offering health benefits to their retirees from 29% in 2020 to 21% in 2023, compared to 66% in 1988. Among the large Employers Still Offering Health Benefits The KFF survey shows that the share of those receiving these benefits through Medicare Advantage plans has increased significantly in recent years. Today, about 5 million Medicare-aged retirees receive their Medicare benefits and supplemental retirement benefits from a group Medicare Advantage plan, according to a separate analysis of Medicare Advantage enrollment data by KFF.
This data note analyzes five national surveys to assess health insurance trends for retirees ages 65 and older (Figure 1). These five surveys produce slightly different estimates of retiree health coverage, but together paint a clear picture: The share of Medicare-age adults with employer- or union-sponsored retiree health insurance has been declining and appears to be on the way to extinction.
Estimates of the proportion of people age 65 and older receiving retiree health insurance benefits in 2022 vary across the five surveys, ranging from 21% (American Community Survey) to 12% (National Health Interview Survey). These differences are likely due to differences in sample size, differences in question wording, omission patterns, and sample population (see Methods). As with the 2022 estimates, the trend lines vary. For example, the American Community Survey shows the rate is declining from 31% in 2008, while the National Health Interview Survey shows the rate is declining this year from 22% in 2008.
Retiree health benefits appear to be in danger of extinction for several reasons. The rise in healthcare costs has put pressure on employers to make trade-offs between providing benefits to active workers and those to retirees, accelerating this trend. Union membership has declined steadily over the past few decades, reducing pressure on employers to offer retirement benefits. And demand for retirement benefits may be less strong than before because Medicare benefits have improved somewhat over the years, with the addition of a prescription drug benefit in 2006 and the offering of some additional benefits to beneficiaries who choose to enroll in Medicare decide advantage plan.
The erosion of retiree health coverage in the face of high health care costs and the modest incomes and assets of a large portion of the Medicare population increases the importance of Medicare coverage decisions for retirees and their spouses, as well as the importance of addressing the challenges facing the future of Medicare. In each of these national surveys, retirement benefits appear to be steadily declining and may soon be gone.
Methods
This data note is based on an analysis of five national surveys. The Current Population Survey analysis cannot be traced back to years prior to 2013 because the U.S. Census Bureau made improvements to the Current Population Survey health insurance questionnaire between 2012 and 2013. This analysis does not include data from the current Medicare Beneficiary Survey due to methodological changes that are expected to impact coverage allocation and trends.
The differences reported in the paper and figure indicate a statistical significance of 5% compared to 2022, with the exception of SIPP, HRS and the pre-redesigned CPS segment (from 2005), which relate to the years 2021, 2020 and 2012 refer, respectively. The numbers shown show the percentage of retirees age 65 and older who have employer-sponsored insurance (ESI) from any source, except those in the ACS, which is the percentage of people age 65 and older those who are not employed have ESI available from any source.
All surveys provide annual estimates, except SIPP, which provides data monthly; All SIPP data presented is from September of the respective year. HRS data is provided every two years (even years).
Tricia Neuman is at KFF. Anthony Damico is an independent consultant.