Retiree health benefits have seen significant cost increases over the past two decades, with premium costs rising faster than workers' earnings and overall inflation. This trend has been particularly pronounced for retiree health premiums, which have tracked or exceeded general health premium cost increases and are the primary factor in the increase in retiree health benefit obligations. Private employers have responded to rising health premium costs in three ways: increasing retirees' share of premiums, increasing cost-sharing requirements through higher deductibles and copays, and offering retiree health benefits as a standalone benefit rather than as part of a comprehensive benefits package. These trends have significant implications for the public sector, as state and local governments must also address rising retiree health benefit costs. Steps that could be taken in current health policy reform debates to control health premium inflation include increasing transparency in health insurance markets, promoting competition, and implementing measures to reduce the growth of healthcare costs.
