Expected Retiree Health Costs Drop, Still Very High for Seniors without Employer Coverage

A new study from Fidelity Investments has estimated that on average, a 65 year old couple retiring this year without employer provided retirement coverage will be charged $230,000 over the course of their lives for health care expenses. This is 8% less than the $250,000 projection Fidelity made last year.

Fidelity credits President Obama’s health care reform bill for the difference. In particular, seniors can expect to pay less out of pocket for their prescription drugs due to the closing of the ‘doughnut hole’ coverage gap in Medicare Part D. In 2011 seniors were expected to pick up all of their annual prescription drug costs that fell between roughly $3,000 and $6,500. By 2020 that gap in coverage will be closed.

Fidelity Analysts warn that this may only be a one time drop. They expect to see continued increases in health care costs in future years due to increases in prices and the adoption of new technology.

These large and growing health care costs point to the importance of employers providing their retirees with subsidized health care coverage. The Employee Benefit Research Institute in 2010 found that an average retired couple with subsidized employment based coverage could expect to pay $100,000 less in health expenses over the course of their lives compared to retired couples without subsidized coverage.

-- CNBC / USA Today / Employee Benefits Research Institute