Daily Dispatches
A car passes the IBM offices in San Jose, Calif.
Associated Press/Photo by Paul Sakuma
A car passes the IBM offices in San Jose, Calif.

Retiree benefits exchanged for subsidies


Technology giant IBM plans to end its health insurance plans for 110,000 Medicare-eligible retirees. The company said costs to cover such retirees were set to triple by 2020. Instead, IBM will provide funds to buy insurance in a healthcare exchange. Time Warner Inc. announced a similar plan for its retirees over the weekend. 

The word “exchange” sent some conservatives into a panic, as widely publicized Obamacare exchanges get set to launch Oct. 1. But the exchanges advocated by companies are more or less private. Under this model, employers subsidize those buying insurance through a private exchange, not unlike the way the government will operate the Obamacare exchanges. IBM will make annual contributions to health retirement accounts, which retirees can use to buy insurance through Utah-based Extend Health. 

It’s hard to tell how much the Affordable Care Act led to IBM’s decision. With costs rising so fast already, the market was bound to respond. The least Obamacare did was publicize the exchange model. Extend Health is almost 10 years old, but a third of its partners joined in the last year. Insurance exchanges may be the wave of the future, whether public or private. 

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On the downside, though privately run, Extend Health is a Medicare exchange. That means IBM retirees are shifting to government and taxpayer rolls, if somewhat indirectly. The number of U.S. retirees currently in private employer health plans wasn’t immediately available. But Bloomberg reported 44 percent of companies plan to stop administering traditional retiree health plans. 

For now, retirees will be the guinea pigs for the private exchange model. Little is known about whether quality or cost of coverage will change for retirees, compared to current plans. But we’re sure to find out soon: Retirees aren’t the only ones looking at exchanges. 

CNBC reported 40 percent of companies are considering exchanges for active employees. Private exchanges insure just about 1 million people now. But as the market warms up to exchanges, they could grow to 40 million by 2018. That would outpace enrollment in government exchanges, which are expected to reach 31 million. The most obvious perk of such a trend: Employees would get to choose their own plans. 

In other healthcare news, SeaWorld became the latest company to announce hour cuts for its part-time employees. By reducing the hours limit from 32 to 28, the amusement park operator will avoid Obamacare’s employer mandate. SeaWorld hasn’t said how many of its 18,000 part-time employees will be affected. A study by Mercer revealed 12 percent of U.S. companies—20 percent of those in the retail and hospitality industries—say they are cutting worker hours because of the mandate.

Andrew Branch
Andrew Branch

Andrew is a freelance writer living in Raleigh, N.C. He was homeschooled for 12 years and recently graduated from N.C. State University. He writes about sports and poverty for WORLD. Follow Andrew on Twitter @AndrewABranch.


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