Companies dumping retirees on defined benefit health plans to defined contribution.

[eridani]

Media-company Time Warner Inc. plans to move its U.S. retirees from company-administered health plans to private exchanges, according to a person familiar with the matter. The company will allocate funds in special accounts that retirees can use to go shop for coverage, the person said.

The news comes as International Business Machines Corp. also plans to move about 110,000 of its own retirees off its company-sponsored health plan to a Medicare insurance exchange.

President Barack Obama's health-care overhaul calls for such exchanges, which will go live next month, and employers are looking at similar, privately administered exchanges as an alternative to offering their own health plans.

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IBM retirees have a big incentive to pick insurance through plans offered by Extend Health: Retirees who are eligible but don't enroll in a plan through Extend Health won't receive the company contribution.

Extend Health said nearly 50 companies in the Fortune 500 have become clients, including Caterpillar Inc. and DuPont Co.

The approach was adopted for active employees last year by Sears Holdings Corp. and Darden Restaurants Inc.

Comment by Don McCanne of PNHP: We already knew that employers were canceling retiree coverage in their company-administered health plans and switching to defined contribution approaches which place the risk of future health care increases onto the backs of their retirees. What is new is the acceleration of this shift by large employers who are taking the easy way out by using private insurance exchanges - a new intermediary that adds to the profound administrative waste already inherent in our health care system.

What is next? Sears Holdings and Darden have already adopted these defined contribution approaches for their active employees. When IBM, Time Warner, Caterpillar, DuPont, and the others that are sure to follow find that these new retiree programs are so successful in controlling the employers' costs, how soon will it take them to shift their active employees into these plans? Even the union-negotiated plans are at risk since unions have lost much of their negotiating clout.

Middle-income Americans are already feeling the crunch. They realize that juggling cost-of-living, education expenses, defined contribution retirement funds, housing and transportation, and other costs is becoming much more difficult as the American Dream is being slowly chiseled away. They know that it is happening, but their lack of taking an activist stance seems to suggest that they don't know what to blame it on.

Well, it's pretty obvious. We have a government of, by and for the one percent. Unless the ninety-nine percent wake up, we'll soon see virtual moats around their castles. In fact, just try to get close enough to knock on their doors today, and you'll see what a private police state for the one percent is like.

My comment: People close to retirement age can be charged three times as much for underinsurance with ACA plans.

[FarCenter]

1. I don't think "defined contribution" is accurate.

My understanding of the IBM shift is that it is essentially the same as what my company did.

Previously, the company paid for what was the equivalent of Medicare Part C or Medicare Advantage coverage and Part D drug coverage within the corporate medical plan. When a retiree hit 65 and went on Medicare, the retiree's contribution (deducted from the pension) and the company's cost decreased, since Medicare was picking up the major part of the retiree's cost.

A couple of years ago, they stopped doing this. They stopped deducting from the pension and they upped the pension by an amount equivalent to part of their previous cost. They also arranged with a benefits consulting company to provide a web site and phone assistance to retirees in the task of choosing coverage. The retiree could pick new Medicare Advantage and Part D coverage from a selection of insurance providers or go with plain Medicare A&B, with or without Medicare Supplement and/or Part D coverage from insurance providers. This "exchange" was really just a consulting function and you didn't actually buy from the exchange -- they put you in contact with the actual insurance companies.

I eventually picked my own coverage because the insurance policies available through the exchange were not the best for me.