IBM retirees will soon be moved off the company’s traditional health plan and given money to buy into a health-insurance exchange. The company is moving employees away from its current plans after new projections showed costs tripling by 2020.
On Saturday, an IBM spokesman said the change will affect more than 110,000 retirees who are eligible for Medicare.
IBM will make annual contributions to health-retirement accounts. Those contributions can be used to buy Medicare Advantage or supplemental Medigap policies offered through a private Medicare exchange.
The IBM retirees change affects medical, prescription drug, and dental and vision coverage.
To explain the changes to health insurance policies, the company is deploying employees around the country to speak about the new health care program for former workers.
The tech giant admits that “some retirees may be skeptical” about the changes. IBM says the Extend Health plan will benefit many employees and possibly lower costs for retirees.
In the 1990s, IBM capped health subsidies to retirees, which means higher costs would eventually lead to higher premiums and out-of-pocket costs for retired workers.
IBM retirees are not the only employees being moved away from traditional health care programs. American Airlines parent AMR Corp. recently sought approval of a similar program in bankruptcy court.
Twenty-eight percent of companies with at least 200 workers provide some type of retiree coverage for employees.
The Kaiser Foundation says 29 percent of all companies with at least 5,000 employees are considering a shift to private exchanges for retired workers. Extend Health is often named as the new alternative. Authors of the Kaiser study say employers are significantly changing the way they view and deal with employee healthcare plans.