It doesn't look to be a good year for employer health care costs, with continued predictions of double-digit increases in premiums in 2003 and 2004.

Employers across the country are stating health care costs for all types of plans will increase at double digit rates, with HMOs and indemnity plans leading the way and higher levels of employee payments expected across the baord.

Overall, 19 percent of all small employers offering health benefits to their employees made changes to their health plan between 2001 and 2002, with 65 percent increasing deductibles amd co-pays, 35 percent switching insurers, 30 percent increasing the employee segment of the premium paid, and 29 percent cutting back on the scope of benefits, according to the Employee Benefit Research Institute (EBRI).

One of the reasons for the double-digit increase is the increasing use of prescription medications, combined with the much higher costs of the new drugs in use.

Retirees need to plan for higher payments

Many private sector employers have been reviewing their retire health benefit programs, limiting contributions or elegibility, dropping benefits for future retirees, or, as the result of mergers or takovers, shutting down retiree programs entirely. Many of these changes have been driven by changes in accounting rules that forced employers to account for these long term liabilities to retirees on their current balance sheet.

Retiree health benefits are often available only from larger private sector employers, with few small employers providing benefits past the last employement date. In 2000, only 11 percent of all U.S. employers offered health care benefits to Medicare-elgible retirees and only 12 percent offered health benefits to "early" retirees under age 65, according to EBRI.

A retiree with access to employment-based health benefits in retirement to suplement Medicare will need to have saved a present value of between $37,000 to $750,000 to retire at age 65 in 2003, with the range determined by assumptions made regarding age at time of death, premium levels, annual changes to premiums and out-of-pocket expenses.

An individual without access to employment-based retiree health benefits will need to have saved between $47,000 to $1,458,000 to retire at age 65 in 2003, EBRI said.

Expenses for long term care were not estimated in these examples, so the total amount needed could easily be much higher for retirees.