Rising retirement health expenses must be factored into planning

Without post-employment benefits helping to cover the cost during retirement, a 65-year-old American couple will need about $240,000 to pay their medical expenses.

This estimate from Fidelity Investments is 4 percent higher than last year's, does not include any nursing-home care costs and was made assuming traditional Medicare insurance benefits. The estimate has grown by an average of 6 percent per year since 2002, so this increase is somewhat slower than typical.

One Fidelity executive noted that medical inflation is outpacing salary increases and cost-of-living adjustments for many workers, and is expected to continue rising in the future. In light of that, teachers must be certain that they account for the likelihood that costs will grow as they plan for retirement.

Account-based health plans, which are growing more popular with some school districts and employees, may be useful tools in helping to save, along with 401ks, IRAs and other tools. These can supplement a pension and any other post-employment benefits a worker may have, or substitute for them, depending on the circumstances.

Access to care falling for American adults

Research indicates that basic healthcare services have become less widely accessible in almost every state in the U.S. during the past 10 years.

The number of adults receiving a routine checkup declined about 5 percent between 2000 and 2010, according to the Robert Wood Johnson Foundation and the Urban Institute. Six percent more adults had medical needs go unmet due to expenses in 2010 than during 2000, and the number who made dental visits fell 3.9 percent. These differences were more pronounced among the uninsured, who saw a 10.8 percent rise in unmet medical needs, with almost half reporting that cost stopped them from receiving care.

The effects did vary by state, with 42 reporting an increase in unmet medical needs and 49 indicating that care grew less accessible in at least one of the ways measured. Tennessee, Georgia and Florida were the most strongly affected, according to the report.

With this trend in play, public employees may place an increasing value on their health and other insurance benefits, as it grows more difficult to afford care without coverage. Local, state and federal government policies toward healthcare are also likely to develop in response to this momentum.

Family healthcare costs continue to rise

A recent report finds that the healthcare costs associated with the care of the average family have continued to grow, even if that expansion has tapered slightly.

Analysis by Milliman found that for a family of four participating in an employer-sponsored preferred provider organization plan would accumulate healthcare costs of $20,728 this year, an increase of 6.9 percent from last year.

While that increase is smaller than past jumps, it still puts a strain on the health insurance expenses of both school districts and employees.

"The average rate of increase this year dips below 7 percent for the first time since we began analyzing these costs, but the total dollar increase is still the highest we have seen," said Lorraine Mayne, principal and consulting actuary with Milliman. "When the total cost is already so high, even a slower rate of growth has a serious impact on family budgets."

The burden of high healthcare costs has led many school districts to examine their own providers. Some districts have chosen to move to a model more focused on health reimbursement arrangements paired with a high-deductible healthcare plan or onsite wellness centers.

 
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