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Interest in Retiree Medical Accounts (RMAs) growing

     While much of the public's attention about the growing cost of health care has been focused on pharmaceutical costs, some companies have become increasingly concerned about retiree health costs. In examining this area Researchers from RTI International of North Carolina and the Health Research and Education Trust in Washington, D.C. have found a steady decline in the number of companies offering benefits to either early or Medicare-eligible retirees; the percentage of companies fell to 34% in 2001 from 46% in 1991 and 37% in 1997. Some companies have reported they no longer offer retiree health benefits to new employees or current employees. In addition, almost 10% of the large firms indicated that in the next two years they are very likely or somewhat likely to eliminate retiree health benefits for new employees or current employees. And for current retirees, 6% of the companies are somewhat likely to eliminate retiree health benefits entirely.

     No company wants to be perceived as being insensitive to the medical needs of workers who have given the organization years of service. Consequently, a small but growing number of companies have begun to explore or implement Retiree Medical Accounts or RMAs. Companies initially tried to address the problem with retiree medical costs by first putting caps on their premium contributions instead of totally eliminating retiree medical benefits. Unfortunately for the retirees, these plans are now reaching the caps. As a result, interest in RMAs as an alternative has increased because they limit financial liability and shift more responsibility to the retired worker. Generally these accounts are set up so that the company contributes a set amount for every year of service and places minimum age and service requirements on participation.

     Watson Wyatt recently conducted a survey of 56 large companies and found few companies (2%) offer RMAs; however, an additional 7% have implemented them for future retirees and 13% for new hires. Because the RMAs are still a fairly new health costs-funding mechanism, the annual amount $750 - $2,500 has varied tremendously. When the employee retires, they can put the money toward the purchase of health coverage.