Business can choose to offer post-retirement health insurance for retirees and their families at the company's discretion, according to the Small Business Council of America. No federal laws govern the practice, which is considered a fringe benefit. Some companies allow employees to pay for their coverage after retirement while others provide partial or full, continued coverage. Businesses also have the legal right to terminate that coverage.
Oversight
Insurance companies typically set the rules and parameters by which a company can provide post-retirement health coverage, according to the Small Business Council of America. A company's insurance carrier often requires employers to offer post-retirement coverage to all retirees and to continue to pay at least 50 percent of the annual premiums, or to offer the benefit to no one.
Function
By restricting the practice of selective coverage, insurance companies protect themselves from being stuck with only the neediest retirees. By requiring employers to offer the benefit to all or no retirees, the insurance companies retain the premiums from the entire pool of insured parties. To circumvent the tight insurance company rules, employers often purchase employee health insurance through professional organizations that usually provide an option for post-retirement coverage, according to the Small Business Council of America.
Warning
Companies that falsify records to allow retirees to continue paying for their own coverage as a working employee face consequences. An audit of the company following a large claim from the retired employee might reveal the deception. At that time, coverage might be denied and the retiree could end up with exceptionally large medical bills. According to the Small Business Council of America, premiums paid may be returned to the retiree or not. Insurance companies are not obligated to refund premiums paid under false pretenses.
Types
Retirees eligible for Medicare can use post-retirement health insurance coverage as a secondary policy to cover what Medicare does not pay. Additionally, many employer plans provide employees the option of continuing coverage for their dependents based on the group rates. According to Medicare.gov, many insurance programs provide coverage for co-pays, prescriptions and family coverage to cover what Medicare does not pay. Plans could include the Federal Employee Health Benefits Program, Veterans' benefits or COBRA.
Options
An option provided by employers to provide post-retirement funding of health insurance can include a post-retirement health care savings plan. According to the University of Minnesota, many state and federal agencies provide the benefit to employees that allow pretax donations to be invested in savings accounts targeted for post-retirement health-care costs, including direct services payments and health insurance premiums. The savings plans operate much like a 401(k) plan, but use of the money is restricted to health-care costs.
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