The House health care reform bill includes a provision that limits an employer’s ability to reduce retiree health benefits. The legislation says that employers cannot lower the benefits or raise premiums. However, it also says that as long as any reduction is not substantial it is okay. So, what does substantial mean? There is some general discussion but clearly, if this provision remains it will require substantial regulatory clarification. A substantial decrease in benefits is one that is greater than a 5% reduction in actuarial value. Likewise, premiums in terms of dollars and percentage of premium cannot be raised by more than 5%; interestingly any Cap on employer costs in effect at the time of retirement can be honored.
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