Companies Moving Retirees’ Health Plans to Insurance Exchanges

IBM, Time Warner and others begin shifting their retirees’ health plans to private exchanges.

September 10, 2013

NEW YORK – Many companies, including Time Warner and IBM, are shifting their U.S. retirees from company-administered health plans to private exchanges, allocating funds in special accounts that retirees can use to shop for coverage, the Wall Street Journal reports.

IBM plans to move about 110,000 of its retirees of its company-sponsored health plan to a Medicare insurance exchange. The Affordable Care Act calls for such exchanges, which go live next month, and employers are looking at such privately administered exchanges as an alternative to offering their own plan.

The move is an effort by companies to lower their health care costs by moving to the “defined contribution” model they previously adopted for pensions.

Extend Health, a Utah-based exchanged, signed up IBM as well as roughly 300 other companies, a third of which joined this year alone.

Bryce Williams, managing director of Towers Watson Exchange Solutions, which runs Extend Health, said the exchange has moved more than 500,000 retirees over to its service. 

Time Warner is shifting its retirees to private exchanges beginning January 1. It said the shift will provide it with greater visibility into its future health costs while providing its retirees with more insurance choices. 

"Companies are moving away from retiree health plans generally as costs become prohibitive in some instances," said Ariel Gonzalez, director of federal health and family government affairs for AARP.

Gonzales said AARP generally views exchanges positively, though he would be concerned if companies use them to reduce benefits. 

Both IBM and Extend Health said nearly all retirees will be able to join plans that offer equal of better value than what IBM currently offers.

IBM retirees will have a strong financial incentive to choose a plan offered by Extend Health: Retirees who do not enroll in a plan through the private exchange won’t receive the company contribution.

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