The proportion of large employers offering retiree health insurance in the U.S. has declined by half in the past 20 years. This paper examines the potential implications of this change by estimating the effects of a retiree health insurance (RHI) offer on a comprehensive set of labor, health and health care use outcomes in the near-elderly population. The analysis is based on ten years of longitudinal data from the Health and Retirement Survey (1992-2002). After restricting to respondents who have employer-sponsored health insurance at baseline, I find that an RHI offer increases the probability of early retirement by 35 percent for both men and women. An RHI offer decreases the probability of being uninsured by 55 percent, while increasing the probability of employer-sponsored coverage and decreasing the probability of public coverage. There is suggestive evidence that individuals with an RHI offer are more likely to visit the doctor, use prescription drugs on a regular basis and have outpatient surgery. While we see no significant effect on health, RHI provides significant protection from high out-of-pocket medical costs. In the top 40 percent of the out-of-pocket spending distribution, those with an offer of retiree coverage spend 21 percent less on average.Estimates of the value of RHI of over $3,000 per year suggest that increasing opportunities for the near-elderly to purchase coverage at actuarially-fair prices through the individual market or public programs could significantly increase insurance coverage and reduce financial risk for this age group.

This volume, from the Pension Research Council of the Wharton School, highlights many of the special health insurance problems facing the elderly and some of the solutions that any reform process must consider.

This paper analyzes the effects on retirement of employer provided health benefits to workers and retirees. Retiree health benefits delay retirement until age of eligibility, and then accelerate it. With a base case of no retiree health coverage, granting retiree health coverage to all those with employer coverage while working accelerates retirement age by less than one month. Valuing benefits at costs of private health insurance to unaffiliated individuals, rather than at group rates, increases the effect. Ignoring retiree health benefits in retirement models creates only a small bias. Changing health insurance policies has a small effect on retirement.