The $5 billion subsidy in the healthcare reform legislation for companies that provide medical coverage to pre-65 retirees may prove the last hurrah for such benefits. Although the subsidy was intended to bolster companies' coverage for earlier retirees until insurance exchanges begin in 2014, analysts say the $5 billion will run out in half that time. And a recent survey by HR consultancy Towers Watson shows many employers are moving away from providing retiree health benefits.

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

Until 2014, companies have good reason to continue sponsoring their own coverage for pre-65 retirees, says Dave Ostendorf, chief health actuary at Towers Watson. People in that age range are not yet eligible for Medicare and they often have medical problems that make it hard for them to get coverage in the individual market.