Health Costs for Sears Retirees Expected To Rise; Those Under Age 65 To Pay Full Premium

Main Category: Public Health
Article Date: 26 Sep 2005 - 18:00 PDT

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Sears Holdings on Thursday announced that starting next year, retirees younger than age 65 will have to cover the full cost of their health insurance, the Chicago Tribune reports (Yerak, Chicago Tribune, 9/23). Under the new policy, Sears at the end of the year will eliminate a health insurance subsidy for retirees younger than age 65 who retired after Jan. 1, 2000. Sears also will eliminate the subsidy for retirees younger than age 65 who retired between 1978 and 2000, but those retirees will become eligible for the subsidy when they reach age 65. In addition, Sears will eliminate the subsidy for employees ages 40 and older who decide to retire, effective immediately (Guy, Chicago Sun-Times, 9/23). About 15% of the 45,000 Sears retirees enrolled in the company health insurance plan are younger than 65, and about half of those will become eligible for the subsidy in the future. According to Sears retirees, the new policy will increase out-of-pocket health care costs for retirees younger than age 65 by about 40%. Sears said that retirees younger than age 65 will still have access to the company health insurance plan, which likely will cost less than individual health coverage (Chicago Tribune, 9/23). Those retirees will have access to health insurance "at competitive rates," Sears said, although the company declined to specify the amount of their monthly premiums (Merrick, Wall Street Journal, 9/23). Retiree health care costs accounted for about 17% of operating income in 2004, and Sears officials said that the new policy will allow the company to become more competitive (Chicago Sun-Times, 9/23).

Reaction
Officials for the National Association of Retired Sears Employees said that they are "cautiously optimistic" about the new policy (Chicago Tribune, 9/23). NARSE Chair Ronald Olbrysh said, "The pre-65 people are going to struggle." He added, "The worst scenario would be if Sears said they're not covering anything, but they're not taking that approach" (Wall Street Journal, 9/23). Meanwhile, Sears officials declined to disclose the details of changes to health benefits for current employees but said that new benefits include a $30 tobacco-free credit, discounts for workers who fill prescriptions at company pharmacies and health savings accounts (Chicago Tribune, 9/23).

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