updated 12/14/2004 12:23:19 PM ET 2004-12-14T17:23:19

Most large employers will maintain prescription drug benefits for retirees after the Medicare drug insurance program begins in 2006, according to a study released Tuesday.

But facing yet another year of double-digit increases in retiree health costs, many employers are passing more of the expenses to their retired employees, the survey of 333 large companies showed.

Eight percent of employers said they eliminated subsidized health benefits for future retirees in 2004, and 11 percent said they are likely to do so next year.

The survey was conducted between May and September 2004 by benefits consulting firm Hewitt Associates and the nonprofit Kaiser Family Foundation. A similar survey by the firms in 2003 found that 10 percent of firms dropped coverage for future retirees and 71 percent made retirees increase contributions for their coverage.

The fate of retirees with employer-sponsored drug benefits was a major consideration of the authors of last year's Medicare prescription drug law.

The number of companies that offer health benefits to retirees has been declining for at least 15 years. To keep that trend from accelerating, the law includes up to $88 billion over 10 years in subsidies to companies that offer prescription benefits that are at least the equal of Medicare's.

In 1991, 80 percent of firms employing 1,000 or more workers offered health coverage to retirees. By 2003, the number had fallen to 57 percent, Hewitt said.

The new survey, conducted before Medicare issues final regulations about the drug benefit, found that 8 percent of employers said they would drop retirees' drug benefits in the program's first year.

An additional 58 percent said they probably will accept the tax-free subsidy, at least in 2006. Seventeen percent said their drug plans would supplement the Medicare program, similar to how other health benefits wrap around Medicare coverage. The rest said they don't yet know or are pursuing other, undisclosed plans.

"What this means over the long term is unclear," said Tricia Neuman, director of Kaiser's Medicare Policy Project. "There could be a lot of questions about what the new drug benefit will look like."

The more troubling finding in the survey is the elimination of health benefits for future retirees, Neuman said. More than 100 larger employers have dropped those benefits since 2001.

Medicare offers health benefits to the disabled and people 65 and older. But retirees between 55 and 64 can find it difficult to afford health insurance when they can't get it from their employer.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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