When President Bush signed the bill in December 2003, he enacted statutes that create a health savings account program, a Medicare drug discount card program and a Medicare prescription drug benefit program for beneficiaries without employer-sponsored retiree benefits.

MPDIMA also provides $89 billion in subsidies to encourage employers to add or keep their own retiree prescription drug benefits.

The government says it will cover 28% of an employer's retiree prescription drug expenditures that fall within a certain range. In 2006, if the program takes effect as scheduled, the initial range will be $250 to $5,000 in prescription drug expenditures per covered retiree. The maximum subsidy will be $1,330 per retiree, according to an analysis by researchers at the Henry J. Kaiser Family Foundation, Menlo Park, Calif.

One-third of U.S. retirees have employment-related health coverage, but only 3% of employers with fewer than 200 employees offer retiree health benefits, and the proportion of larger employers that offer retiree benefits dropped to 34% in 2002, from 66% in 1988, according to private survey results compiled by the Centers for Medicare & Medicaid Services.

Government drug subsidy checks could help protect the few small and midsize retiree health plans that are still in place, says Randy Morreale, a producer with the Neefus Stype Agency, Aquebogue, N.Y.

But, in the past 2 years, “I've seen more and more companies not offering the retiree coverage,” Morreale says.

These days, government agencies and unionized employers are just about the only small and midsize employers in Morreale's market that offer retiree health benefits, and he has a hard time imagining that a modest subsidy will be enough to get other small and midsize employers to start new retiree health plans.

Even persuading small and midsize employers to offer voluntary, retiree-paid products to their retirees is difficult, Morreale says.

Reproduced from National Underwriter Edition, April 19, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.