IBM to Move Retirees Off Health Plan, Into Exchanges

[Mulligan]

Well l bet the young people buying health insurance on the exchange are doing somersaults for joy over this possible trend. Let's see, they already get pounded on a government mandated 3-1 ratio on premium costs to subsidize old people. Now businesses are gonna start dumping a bunch more oldies into the exchange. And I am sure they all aren't as healthy as Jack Lalanne was. IBM gets to have lower group rate costs for their company by dumping the old folks, and everybody in the exchange gets to help pay for the increased cost. Looks like a win-win plan to me!

[daylatedollarshort]

Many people without group coverage, young, old and parents with kids and pre-existing conditions can't get health insurance at any premium price right now, pre-ACA.

Are there any other developed countries that have health insurance only possible for people over 65, those employed with group coverage and extremely healthy young people?

[scrabbler1]

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Originally Posted by travelover Right, this is an inherent unfairness now. Joe gets his health care tax free from his employer and Pete pays a higher premium, with after tax money.

Yup, as I was putting together my ER budget and in my first few years of ER, I saw just how unfair the tax treatment of HI premiums was. I saw 3 categories of different tax treatment of HI premiums.

(1) Tax-free, the employer-paid portion of group health premiums.

(2) Tax-deductible, the employee-paid portion of group health premiums or the portion of individual HI premiums over the AGI limit, if the person itemizes his deductions.

(3) After-tax, the portion of individual HI premiums under the AGI limit, or if the person is not itemizing his deductions.

When I was working, my HI premiums were in (1) and (2). When I ERed, my HI premiums were in (3), sometimes a part of them in (2) but only if my income were low enough; and it is tougher now with the AGI % rising from 7.5% to 10%. Furthermore, when I had an increase in Qualified Dividends or LTCG which were taxed at 0%, my tax bill rose a little bit anyway because my AGI still rose and eroded the deductible portion of my HI premiums.

I recall writing a letter to my members of Congress back in 2009 explaining this inequity and suggesting a way to fix it so everyone was subject to the same tax treatment. What I suggested was to eliminate (1) by making the employer-paid portion taxable and to merge (2) and (3) by making it a deduction to income even if the taxpayer doesn't itemize his deduction, like the way an IRA deduction does not depend on itemizing one's deductions. Never heard back, big shocker.

I recall about a dozen years ago my former company reducing its retiree health insurance program costs by doing 2 things - no eligibility for future retirees, and a freeze in the future employer-paid portion for existing retirees so the retiree has to pay for all premium increases going forward.

[samclem]

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Originally Posted by sengsational I've always suspected that the "productivity" of the US was boosted by this linkage.

Could be. Under our present "system" employers can buy health insurance for an employee at a significant discount to what the employee would need to pay, and this benefit, as part of the compensation package, saves the employer money compared to paying the equivalent cash. And the value of this benefit is >huge< to employees who have family members with medical issues: we all know people who are working for a particular employer primarily for the medical benefits. Now that individual policies will be widely available and standardized and now that all mid-to-large employers must provide health insurance, the playing field is more level. I'd expect workforce mobility to increase, and that's good for the efficiency of the national economy. What that means to total hourly compensation will depend on the market for workers.

I'm waiting to see how employers/former employers leverage the offered government individual subsidies to reduce their costs.

[Katsmeow]

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Originally Posted by MichaelB Reading the article, IBM is directing it's eligible retired employees to a private health care exchange, and contributing a fixed amount toward the purchase of a Medigap policy. This is the first real life example of these private exchanges that have been referenced lately in the media. By contributing to a policy on the exchange, this is probably not a taxable event for the employee.

OK, I searched for and read the whole article now which makes it clear that this has nothing to do with ACA exchanges. This is dealing with Medicare-eligible employees where IBM is apparently contributing to the supplemental coverage.

I was thinking that what IBM was doing was ending its entire retiree program to send retirees who were not eligible for Medicare to the ACA exchanges with a check that equated what IBM had been paying for retiree coverage.

The article doesn't actually address at all pre-Medicare eligible retirees or the family members of retirees.

DH's former employer does provide subsidized retiree coverage for the retired employee and spouse and children (up to age 26). Once the retiree or spouse is Medicare eligible then the coverage ends, but the employer pays for the prescription drug plan (a specified one) for just the employee I think.

I think it would make sense for an employer to end that kind of retiree coverage for the pre-Medicare employee/spouse and children and to contribute to the cost of an ACA exchange policy. I thought that was what the IBM article was about, but it wasn't.

[samclem]

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Originally Posted by samclem I'm waiting to see how employers/former employers leverage the offered government individual subsidies to reduce their costs.

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Originally Posted by Katsmeow I think it would make sense for an employer to end that kind of retiree coverage for the pre-Medicare employee/spouse and children and to contribute to the cost of an ACA exchange policy.

But, would the company have to be the "first payer", or could they put the government in that role? Former employees would go to the exchange and buy a policy, the government provides the subsidy if they qualify. Former employer would ask the former employee for a copy of the tax return and provide a make-up payment to offset some/all of the cost of a Silver-level plan that exceeded any payments the former employee received from the government. Of course tax returns are private and the former employee wouldn't need to provide them to their former employer, but then they wouldn't get this "former employer subsidy."

[Bestwifeever]

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Originally Posted by Katsmeow .... I think it would make sense for an employer to end that kind of retiree coverage for the pre-Medicare employee/spouse and children and to contribute to the cost of an ACA exchange policy. I thought that was what the IBM article was about, but it wasn't.

My coverage under DH's retiree health insurance benefits ends the minute his does, when he starts Medicare. I will go on Cobra, with no contribution from DH's company.

I have always felt most grateful and fortunate as a spouse to have been able to be on DH's retiree health insurance (including being able to use cobra in that there of course are per existing conditions that pre-ACA would immediately have excluded me). I wonder how long companies will continue that (in that single and child free retirees get no benefit from it). It could be a big unexpected cost.

[Chuckanut]

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Originally Posted by Mulligan Well l bet the young people buying health insurance on the exchange are doing somersaults for joy over this possible trend. Let's see, they already get pounded on a government mandated 3-1 ratio on premium costs to subsidize old people. Now businesses are gonna start dumping a bunch more oldies into the exchange.

True, but many of those older people include their parents. And let's not forget that unless these youngsters are very unfortunate, most of them will become the older generation at some point in their life.

[Mulligan]

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Originally Posted by Chuckanut True, but many of those older people include their parents. And let's not forget that unless these youngsters are very unfortunate, most of them will become the older generation at some point in their life.

That is certainly true. However I guess I am worried about the "law of unintended consequences". Kind of like saving money. If one person saves frugally and saves all his money, he will have a successful retirement. If everybody does it, the economy crashes and nobody has a job or any money to save. I have read some city governments are considering purging their retirees and send them to the exchanges. If everyone dumps old people into the exchange but are not dumping young people also, the premiums will escalate. At what point will the young people just say "screw it I ain't paying". In their minds they will think why pay several hundred plus a month and still have a 5k deductible of money they don't have anyways.
Just my opinion, but I am worried about trying to institute a form of national health care system through insurance policies. It appears the mismashing of the old system employer health coverage, retiree health benefits, with the new system of insurance mandates, deductibles, poor people unable to afford deductibles even if premiums are free might make for a bad system. It is a shame that the whole thing couldn't be blown up and start fresh with an entirely new system. And maybe deal with cost savings for the system instead of just different cost sharing/dumping plans.

[rescueme]

I was notified a few weeks ago that the megacorp I retired from was going to do the same thing.

Originally, panic set in - until I attended one of the sessions held to explain the why along with the benefits of the "improved" program.

My former company (like many others) contributed a set amount for health care (both pre/post Medicare), and took care of arranging the plans. Before age 65/Medicare, services were through Blue Cross. After Medicare coverage started, your Primary was Medicare with Cigna as the medigap provider.

Since the company froze their health care contribution (both pre/post) a decade ago, we were paying more and more every year.

I can't complain about the coverage. Both the Blue Cross and Medicare/Cigna plans provided decent coverage, but at an ever increasing price.

What has happened on the retirement/Medicare side is a lot of folks were dropping Cigna medigap coverage and an increasing number were taking a lower cost plan (e.g. Advantage) which was closer to the cost that the company subsidy provided.

Those that did so did not continue with the company plan and they were removed from the "benefit", which also included losing the subsidy.

In a way, this will work out better for me/DW (both on Medicare), since we'll be able to shop around with our company's contribution (added to our own) to select a plan, be it an original Medicare gap plan or a supplemental plan from a private company.

And like IBM, I/DW be going through Extend Health (Towers Watson a/o Jan 1) for selection of our indivudial plan. Unlike our current plan, we can choose what is best for us based upon our indivudial health care plan needs.

We've already updated our indivudial accounts (doctors, meds) on the Extend Health site and have contacted them to go over the info. We will each have our "phone meeting" in late October to select/confirm our selections. Since plans will not be loaded/available until October 1, we've gone as far as we can at this stage.

Heck, it could be worse. My former company could eliminate retirement healthcare contributions entirely (and who knows what the future will bring? )...

BTW, the article (and what we're going through currently) has nothing to do with the ACA exchanges. This is strictly related to Medicare age folks who get a retirement medical contribution from their former employers. See: http://www.medicare.gov/about-us/aff...rketplace.html for details.

[daylatedollarshort]

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Originally Posted by Mulligan Well l bet the young people buying health insurance on the exchange are doing somersaults for joy over this possible trend. Let's see, they already get pounded on a government mandated 3-1 ratio on premium costs to subsidize old people. Now businesses are gonna start dumping a bunch more oldies into the exchange. And I am sure they all aren't as healthy as Jack Lalanne was. IBM gets to have lower group rate costs for their company by dumping the old folks, and everybody in the exchange gets to help pay for the increased cost. Looks like a win-win plan to me!

I think the young people who understand they are currently one pre-existing condition away from being uninsurable on the private health insurance market at any price will be doing somersaults for joy, and I don't mean that sarcastically.

[MichaelB]

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Originally Posted by Mulligan Well l bet the young people buying health insurance on the exchange are doing somersaults for joy over this possible trend. Let's see, they already get pounded on a government mandated 3-1 ratio on premium costs to subsidize old people. Now businesses are gonna start dumping a bunch more oldies into the exchange. And I am sure they all aren't as healthy as Jack Lalanne was. IBM gets to have lower group rate costs for their company by dumping the old folks, and everybody in the exchange gets to help pay for the increased cost. Looks like a win-win plan to me!

This move is for retirees already on or eligible for Medicare, so it doesn't affect the group rates for the employed folks. All those young people in this large group are already paying average premium rates, and get no reduction because they are young.

[Mulligan]

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Originally Posted by daylatedollarshort I think the young people who understand they are currently one pre-existing condition away from being uninsurable on the private health insurance market at any price will be doing somersaults for joy, and I don't mean that sarcastically.

Day, your viewpoint certainly benefits me if true, and I hope you are correct. Just my opinion, but I don't think a lot of them do worry about it. And what disposable income they have is probably needed to survive or having a good time, if rates jump too much, I worry the lure of taking the chance of skipping the insurance to have disposable dollars to have a little fun in life might prove to be too tempting. Although fortunately I have accumulated some wisdom in age to avoid doing something stupid, even at my age of almost 50, my initial thought to paying these new rates was "screw this, I'm not going to get sick or hurt and even if I did it will be after I am on Medicare anyways". Hopefully this will all work out. But then again, I jut read again yesterday that Kaiser did another survey again in August and STILL 44% of the public don't even know Obamacare is law of the land.

[Mulligan]

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Originally Posted by MichaelB This move is for retirees already on or eligible for Medicare, so it doesn't affect the group rates for the employed folks. All those young people in this large group are already paying average premium rates, and get no reduction because they are young.

Thanks for clarification as my thought was wrong. I read another article and it mentioned putting them on the health exchange, but it isn't THE exchange I thought it meant. I learned another thing, too I did not know. I thought when companies gave retirement health benefits, it was only until 65 and on Medicare. I had no idea people continued to get health benefits to pay for the Medicare plans. That is a sweet deal.

[Calico]

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Originally Posted by Mulligan Thanks for clarification as my thought was wrong. I read another article and it mentioned putting them on the health exchange, but it isn't THE exchange I thought it meant. I learned another thing, too I did not know. I thought when companies gave retirement health benefits, it was only until 65 and on Medicare. I had no idea people continued to get health benefits to pay for the Medicare plans. That is a sweet deal.

This was news to me too. It never occurred to me for a minute that retirees were getting any help with health care costs once on Medicare. I assumed all the help was for pre-65 folks.

[mickj]

IBM to transfer U.S. retirees to healthcare exchanges next year | Reuters

Seems IBM is taking advantage of locking in an outside party to offload some of their risk.

Quote:

The plan, it said, offered IBM retirees more choice and better value than the company could provide through existing group plans.

yeah right!!!

I am glad that I left that company. Employees are their enemies.