As the new Medicare drug benefit nears its second year, nearly eight in 10 large employers expect to continue to offer drug coverage to their retirees and accept subsidies from the federal government to offset some of those costs, according to a new survey of 302 large private-sector employers conducted by the Kaiser Family Foundation and Hewitt Associates.

At the same time, surveyed employers report taking a number of steps in 2006 that increase what retirees themselves pay for health benefits. For example, in 2006, 74 percent of firms increased premiums for retirees under age 65, while 58 percent raised premiums for Medicare-eligible retirees. Similarly, 34 percent of firms raised cost-sharing requirements for under-65 retirees, and 24 percent did so for Medicare-eligible retirees.

Looking ahead to 2007, surveyed firms say they are very likely to make a number of additional changes that would result in retirees paying more: increase retiree contributions to premiums (64 percent); increase cost-sharing requirements (26 percent); raise drug co-payments (20 percent) and raise out-of-pocket limits (18 percent).

• Retiree Health Benefits Examined: Findings from the Kaiser/Hewitt 2006 Survey on Retiree Health Benefits