The $5 billion subsidy in the healthcare reform legislation forcompanies that provide medical coverage to pre-65 retirees mayprove the last hurrah for such benefits. Although the subsidy wasintended to bolster companies' coverage for earlier retirees untilinsurance exchanges begin in 2014, analysts say the $5 billion willrun out in half that time. And a recent survey by HR consultancyTowers Watson shows many employers are moving away from providingretiree health benefits.

Of course, the ranks of companies that provide such benefits hasbeen eroding for some time. Mercer data show just 28% of companieswith 400 or more workers provided health insurance to pre-65retirees last year, down from 46% in 1993. And according to theTowers Watson survey, which was conducted after the PatientProtection and Afford Care Act (PPACA) became law, 43% of companiesthat currently provide retiree medical plan to reduce or eliminatethose benefits. Among companies that would be subject to the excisetax on costly health benefits that goes into effect in 2018, theportion that say they're likely to cut back or eliminate retireemedical rises to 55%.

Until 2014, companies have good reason to continue sponsoringtheir own coverage for pre-65 retirees, says Dave Ostendorf, chiefhealth actuary at Towers Watson. People in that age range are notyet eligible for Medicare and they often have medical problems thatmake it hard for them to get coverage in the individual market.