The long end-tail of the recession and the rising costs of health care — both medical trend/clinical and administrative — are creating uncertainty for employers who cover retiree health benefits. This picture is even more cloudy for pre-retirement benefit plan design.

The bottom line: how do employers balance burdensome health costs with legacy promises?

This question is addressed in Retiree Medical Challenges and Opportunities, December 2009, the fifth annual Towers PerrinISCEBS survey.

Among this survey’s respondent employers, 80% have laid off workers in this recession, 32% have enacted voluntary staff reductions, and 26% have cut benefits.

Nonetheless, 70% are continuing to provide retiree medical coverage to at least some retirees.

And that’s the challenge: how to do “the right thing” while managing costs.

A majority of employers still haven’t weaned off retirees from group sponsorship and onto the individual insurance market…yet.

However, look at the chart labeled Exhibit 2: it illustrates the sobering fiscal fact that retirees are paying more than one-half of medical coverage — on average, $4,140 for a retiree-plus-one for retirees 65 and over, and $7,668 for retirees under 65-plus-one.

Health Populi’s Hot Points: Towers Perrin’s own research finds that, while employee compensation is somewhat improving, it’s not sufficient to make up the lost financial ground felt by most employees.

Thus, as the report simply states, pre-65 retirees are “stuck in limbo.”

Why “limbo?” Think about 3 contributing issues:

1. A lack of access to affordable insurance.

2. Delaying retirement to retain health benefits.

3. Employees who continue to offer retiree health benefits will move to outsource retiree medical delivery, administration and risk.

The wild card is health reform and the federal government’s role in re-shaping health insurance markets.

While Congress may pass incremental reform before the end of 2009, there will be many more tweaks in 2010 and beyond that will continue to re-form health care in America. These legislative changes will continue to challenge employers trying to navigate health benefits for both retiree and active employees.

And the only certainty? More costs, in the form of taxes and cost-sharing, on employee-health citizens.