In a decades-long shift away from traditional employer pension plans, IBM announced on Saturday it would move thousands of retirees from its health plan to plans offered on the health insurance exchanges.
A spokesman for the technology giant said the decision would affect some 110,000 former employees, who will be given money to purchase health insurance on market exchanges opening in October as part of the Affordable Care Act of 2010.
The company once known as “Big Blue” said projections showed that costs for its health plan for Medicare-eligible retirees would triple by 2020, an increase that retirees would pay through premiums and co-payments. Company representatives will meet with beneficiaries around the country to explain the shift. Approximately 1,300 retirees attended a meeting this week in San Jose, Calif., with another meeting planned for Monday in Austin, Texas.
The spokesman said that although “some retirees may be skeptical” about the evolution of corporate-sponsored health care, the new scheme would offer benefits not currently available under the company’s group plans, at a lower cost for some.
The company capped health subsidies for retires in the 1990s as health care costs continued to rise, alarming many former employees. Thus, higher health care costs in the future would be borne not by the company but by the beneficiaries. As times change, other large employers continue the exodus from employer-paid retiree health benefits, including AMR Corp., which owns American Airlines.
Today, 28 percent of companies employing 200 or more workers provide health benefits to retirees, according to the Kaiser Family Foundation. In a report issued last month, the think-tank predicted "a significant change in the way that employers approach health benefits and the way employees get coverage, with employers playing a less active role."
Annual premiums for employer-sponsored family health coverage reached $16,351 this year, up 4 percent from last year, with workers on average paying $4,565 toward the cost of their coverage, according to the Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2013 Employer Health Benefits Survey, released today. During the same period, workers’ wages and general inflation were up 1.8 percent and 1.1 percent respectively.