Costs of Hospital Benefits for Retired Employees

The officers of a client company asked, in mid-1960, for an estimate of the cost of providing hospital benefits for employees who retire under the company pension plan. The pension plan is funded, on an actuarial basis which the company has found to be satisfactory, through a trust fund. The company officials began with the idea that it ought to be possible to provide advance funding for the health benefits of employees who retire with a company pension in the same way regular pensions are provided for in advance. The active employees of the company are covered under Blue Cross and Blue Shield plans; the terms of the Blue Cross plan will be summarized later. The initial request for an estimate was limited to hospital benefits. If a decision were to be made to begin the advance funding of all health care benefits, cost estimates for other areas would be required. This paper deals only with the first estimate.