What Obamacare Means for Corporate Retiree Insurance Coverage

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The news that Time Warner and IBM are changing retiree health-insurance benefits has some claiming the moves are proof that the Affordable Care Act (ACA) is drastically eroding the employer-based health-insurance system it promised to preserve and increasing costs for retired corporate workers in the process.

In truth, corporate America was already looking for ways to trim health-insurance costs, particularly for retirees, long before Obamacare came along. The benefit decisions announced by IBM and Time Warner have little direct relationship with the health care law and will not, as some have suggested, leave retirees without any insurance.

The changes at IBM relate to supplemental health benefits for retirees who already receive Medicare through the federal government. Rather than administer these additional benefits for company retirees over 65, IBM will direct former employees to a Medicare-specific insurance exchange, or marketplace, and subsidize the cost of this extra coverage. Retirees will have to participate in choosing their supplemental plans, but will ultimately have more options, according to IBM. Time Warner, the parent company of TIME, will give retired employees too young to qualify for Medicare subsidies in order to purchase coverage on their own through private exchanges that are separate from the public insurance exchanges that will open Oct. 1 as part of the ACA.

Nationwide, companies have been making similar changes for many years. According to the nonpartisan Kaiser Family Foundation, in 1988, 66% of companies with 200 or more employees that offered insurance benefits to active employees also offered retiree health benefits. By 2008, two years before the ACA became law, the figure had dropped to 29% and is currently 28%, according to Kaiser. In 2009, a year before the ACA was signed, Xerox eliminated supplemental health benefits for retired workers who qualified for Medicare. The decision drew a lawsuit from retirees, but a federal judge ultimately ruled that the group had no legal claim against the company. “It had nothing to do with Obamacare,” says James Marino, a lawyer for the Association of Retired Xerox Employees, which filed the lawsuit.

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Although Obamacare is not directly responsible for corporations cutting back and altering benefits for retirees, the law won’t do much to slow this trend. In fact, it could indirectly increase costs for companies that might, in turn, look to retiree benefits to cut spending. The law sets a minimum floor for what medical care health-insurance plans must cover. Although many corporate health-insurance plans were grandfathered in and exempted from complying with these requirements, the exemption disappears if companies make significant changes to their health-insurance offerings, which is common. Architects of the law say it will reduce the growth of overall U.S. health care spending and costs for individual medical treatments and procedures, which could reduce costs for employers, but it will be years or even decades before this promise can be evaluated on the merits.

And with the law’s public health-insurance exchanges scheduled to launch in just a few weeks, companies can point to them as viable alternatives to company-sponsored retiree coverage. Retirees in their late 50s and early 60s who don’t yet qualify for Medicare and are generally sicker than their younger counterparts currently face some of the highest health-insurance premiums in the individual marketplace. Under the ACA, insurers will no longer be able to charge these people higher rates based on health status, but the law does allow premiums to be set by age. Insurers will be able to charge the oldest enrollees in any given health plan three times as much as the youngest enrollees.

Still, for similarly aged retirees without any subsidies from their former employers — like those who worked independently or for small businesses — the Obamacare exchanges, which will offer public subsidies to low- and middle-income Americans without job-based coverage, could give the first real chance at finding affordable health insurance.

16 comments
rononarun
rononarun

What if you have retiree insurance but it is more expensive than what you could get from the ACA exchange?  Are you eligible for the exchange plan or disqualified because you have retiree insurance, albeit expensive.

SAM23
SAM23

I am still confused as to how Obamacare will apply to employees of the federal government, including both houses of Congress and their staffs: The President and his staffs; The Cabinet and their staffs; The heads of all Federal agencies and their staffs; The Supreme Court and their staffs, etc. And all of their retirees.  After all, their numbers are far greater than those of IBM,Time Warner, Xerox, combined, times 10,000, at least. It would be great if Time would publish a clear  analysis for the American people.  After all, we, the taxpayers, many of whom work for taxpaying companies, like IBM, Time Warner, and Xerox have paid healthcare for them, and will continue to do so.  I am particularly interested in Time's assessment of the impact on those, to quote Time's article above: " Retirees in their late 50s and early 60s who don’t yet qualify for Medicare and are generally sicker than their younger counterparts currently face some of the highest health-insurance premiums in the individual marketplace."  Will this also apply to all Federal government retirees?

Read more: http://business.time.com/2013/09/09/what-obamacare-means-for-corporate-retiree-insurance-coverage/#ixzz2fHbo2zK9             

normtran50
normtran50

yes! premium for retirees will go through the roof. proof is the exchange insurance will charge premium based on AGE as it says in the article. And the bad thing is the Government allows that.

Tina
Tina

Most companies that I am familiar with have already dropped retiree insurance.  Once you are retired, they no longer cover you.  This is not something new.

jacksterss396
jacksterss396

The word "OPTIONS" is a danger word in Corporate America as it actually means they are trying to screw everyone.

In stead of 1 PPO, You will have 4 HMO's to choose from. All your medical decision will then be on a wait and see

if you really need that test, And if you don't die, The lines will be long at the provider specified location for the test.

If you do die, Then I guess their work is done.

JudithSquires
JudithSquires

Time for universal single payer government run healthcare.  Take the profit method out and we'd all be better off.

walloe
walloe

What is the problem people????  It is not one of the 10 commandments or the bill of rights that everyone should get free health care insurance.  The problem isn't corporations providing insurance or payment for insurance, it is the fact that health care costs are out of bounds.  That is the problem that needs to be fixed.  Our government turns a blind eye to the pharmaceuticals who rape the public and play the "new and improved" game with drugs, charging 3x more for basically the same drug that has been used for 20 years.  Also those who defraud the government of Medicare dollars are not found and prosecuted to the fullest extent.  If these two problems were addressed maybe we would see costs coming more in line.  There is more that can be done certainly, but these two are biggies and can get more bang for the buck if fixed.  Our government ignores the root cause of our problems.  If they would fix the problems properly, we would not need to have new bills/laws passed that only compound the problem.

MavisMalone
MavisMalone

I suggest that a rereading of this information is required.  It seems that companies have been changing insurance plans long before Affordable Care Act passed.  At least with ACA retirees will have the opportunity to purchase affordable coverage and if needed subsidized, in the markets.  It may be a win-win opportunity for both employee and employer.

bigred
bigred

In other words, health care for retirees is about to go through the roof.  Nothing like kicking people when they're already down.

mary.waterton
mary.waterton

In other words, big corporations are dumping their employees onto the government with all the p*ss-poor quality of service that implies. You would think that Americans would be smart enough to rise up in revolt, but they are the product of our p*ss-poor public school system, so they don't understand simple math.

User1007
User1007

I'm reading this sentence in the article

Time Warner, the parent company of TIME, will give retired employees too young to qualify for Medicare subsidies in order to purchase coverage on their own through private exchanges...

It seems like their may be a word or two missing. Is Time Warner moving only their non-Medicare eligible retirees to private exchanges?

RussinOR
RussinOR

@JudithSquires except that the 'profit method' drives innovations.  Search for the innovations in health care and technology among the single payer nations and all you're likely to find is patients having to call 911 from their hospital beds to get a glass of water (England).

rononarun
rononarun

@mary.waterton  They are not dumping them on the government because the government is not the one insuring (except in the case of Medicare which was there since 1965) or providing medical services, so your comment is not relevant.

rononarun
rononarun

@User1007  Of course.  By definition, Medicare eligible people are not involved in the exchanges.

Lindar1
Lindar1

@User1007 I read it that Time Warner will begin providing a subsidy to purchase their own health insurance to retired employees under age 65.  Essentially, they will no longer have a company sponsored retiree health insurance program.  The article doesn't say what they may do with any supplemental coverage they may have provided, like RX or for retirees age 65+ who would have already been on Medicare.  The company my husband retired from changed their retiree health insurance program 2 years ago in a similar fashion as Time Warner.  So far, the subsidy has been adequate to pay other insurance premiums. 

MidwestGuy
MidwestGuy

@RussinOR @JudithSquires Plenty of profit motives available in a single payer system. The difference is the profit goes to providers, not insurance companies. Better for consumers too because the providers must compete for your business.